9.Liabilities.ppt

* * Unit Nine Liabilities * * Study Targets ＊To understand the nature of liabilities ＊To learn about current liabilities and long-term liabilities * * ＊ Liabilities are current obligations that occur because of past transactions or events and will result in the payment of economic benefits in the future. ＊They concern the operating cycles of firms ＊Liabilities’ features: ﹡Liabilities are resulted from past transactions or events of the company ﹡They are the current obligations that are born by company ﹡Liabilities are eliminated by future payment of an asset or the future performance of a service. * * 9.1 Current liabilities: short-term obligations that must be paid from current assets within a year. 9.1.1 Accounts payable and notes payable ＊ Accounts payable are short-term obligations to suppliers for purchasing materials, merchandises or services. ﹡In accounting practice, the recording of accounts payable is in accordance with invoices when merchandise received is conformity with the contract in all respects. * * ﹡ accounts payable are entered at the amount of payable. ﹡ If cash discounts on accounts payable, the amount of account payable should be determined by the gross amount before deducting cash discounts. ﹡ If payment is made within the discount period, the earned offsets financial expenses of current period. * * ＊Notes payable are written acknowledgement signed by the maker and promised by the acceptor to pay a definite amount of money during a period of time. ＊It includes commercial accepted draft and bank accepted draft. ＊The payment period of commercial draft is within 6 months. In practice, it is entered in accordance with its face value. The service charges for the payment of bank accepted draft is recorded to financial expenses. * * 9.1.2 Other current liabilities include short-term loans, advances from customer, taxes payable, interest payable, dividends payable, other payables. 9.1.2.1 Short-term Loan ＊Various loans within one ye