Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin Copyright©2012TheMcGraw-Hill Companies,Inc.
The Nature of Liabilities
Defined as debts or obligations arising from past transactions or events.
Maturity = 1 year or less
Maturity > 1 year
Distinction Between Debt and Equity
The acquisition of assets is financed from two sources:
Funds from creditors, with a definite due date, and sometimes bearing interest.
Funds from owners.
Estimated liabilities have two basic characteristics:
1.The liability is known to exist,
2.The precise dollar amount cannot be determined until a later date.
Example: An automobile warranty obligation.
Current Liabilities:Accounts Payable
Short-term obligations to suppliers for purchases of merchandise and to others for
goods and services.
Office supplies invoices
Utility and phone bills