中央财经大学会计专业英语教程.ppt

Chapter 4 Liabilities,Feature TopicWhat is Liability?,Liabilities may be defined as debts or obligation arising from past transactions or events and requiring settlement at a future date.Thus,liability represent existing obligations for a business to part with its resources in the future.,Chapter Skeleton,Define liabilitiesDistinguish between current and long-term liabilitiesAccount for notes payable and the accrual of interestAccount for notes payable with the interest included in the face amountPrepare an amortization table allocating payments on an installment loan between interest and repayment of principleDefine the loss contingencies.Explain the criteria determining their presentation in financial statements.,4.1 Current Liabilities,Current liabilities are obligations that must be paid within one year or within the operating cycle,whichever is longer.The time period used in defining current liabilities parallels that used in defining current assets.,Account payable,Accounts payable often are subdivided into the categories of trade accounts payable and other accounts payable.Accounts payable are recorded at an amount less any available cash discounts.Technically,the ate at which a trade account payable comes into existence depends upon whether goods are purchased FOB shipping point or FOB destination.,Notes Payable,Notes payable are issued whenever bank loands are obtained.Notes payable generally require the borrower to pay an interest charge.Entry Example:p 93,Notes payable with interest charges included in the face amountDiscount on Notes payableAmortization of the discountComparison of the two forms of notes payableCurrent portion of the long-term liability Notes payables usually are classified as current liabilities or as long-term liabilities based upon the maturity date.,Notes Payable,Interest payable 1.The cost of borrowing,is accounted with the passage of time.Income Taxes PayablePayroll liabilityPayroll register 1.It is a special journal used for developing all of the information needed for processing and recording the payroll of a specific pay period.2.Entry Example:p99,Notes Payable,Unearned revenueA liability for unearned revenue arises when a customer pays in advance.Upon the receipt of an advance payment from customer,the company debts cash and credits a liability account such as Unearned revenue,or customers deposit.,Notes Payable,4.2 Long-Term Liabilities,Long-term obligations usually arise from major expenditures,such as acquisitions of plant assets,the purchase of another company,or refinancing an existing long-term obligation which is about to mature.,Maturing obligations intended to be refinanced,One specific type of long-term liability is an obligation which will mature in the current period but which is expected to be refinanced on a long-term basis.If management has both the intern and the ability to refinance soon-to-mature obligations on a long-term basis,these obligations are classified as long-term liabilities.,Installment notes payable,Purchase of real estate and certain types of equipment often are financed by the issuance of long-term notes which call for a series of installment payments.this installment may be due monthly,quarterly,semiannually,or at any other interval.Some installment notes call for installment payments equal to the periodic interest charges.,Allocation installment payments between interest and principle,In accounting for an installment note,the accountant must determine the portion of each payment that represents interest expense,an the portion that reduces an amortization table.Example:p101,Preparing an amortization tableUsing an amortization tableThe current portion of long-term debt,Estimated Liabilities,Loss Contingencies,and Commitment,Estimated LiabilityRefers to liabilities which appear in financial statement as estimated amountsExample:p104,Loss contingencies,Loss contingencies are similar to estimated liabilities,but may involve much more uncertainty.A loss contingencies is a the element of uncertainty-uncertainty to the amount of loss and,in some cases,uncertainty as to whether or not any loss actually will be incurred.,Loss contingencies in financial statement,Loss contingencies are recorded in the accounting records only when both of the following criteria are met:1.it is probable tat a loss has been incurred,and2.the amount of loss can be reasonably estimated.When these criteria are not met,loss contingencies still are disclosed in financial statements if there is a reasonable possibility that a material loss has been incurred,Commitments 1.Contracts to future transactions are called commitments.2.Examples:p107 3.Loss on Commitment,Bonds Payable,What Are Bonds?The issuance of bonds payable is a technique for splitting very large loans into a great many transferable units,called bonds.Each bond represents a long-term,interest-bearing notes payable.Bonds payable differ from capital stock in several ways.,Transferability of Bonds,The quality of liquidity is one of the most attractive features of an investment in corporate bonds.,Types of Bonds,Bonds secured by the pledge of specific assets are called mortgage bonds.An unsecured bond is called a debenture bonds.Bond interest:Is paid semi-annually by mailing to each bondholder a check for six months interest on the bond he or she owns.,Tax advantage from bond financing,Interest payments are deductible in determining income subject to corporate income taxes.Example:p108,Accounting for Bonds payable,Accounting for bonds payable closely parallels accounting for notes payable.1.issuance of the bond 2.semi-annual interest payments 3.accrual of interest payable at the end of each accounting period 4.retirement of the bonds at maturity.Example:p108,Bonds issued between interest dates Example:p110The present value concept and bond prices The price at which bonds will sell is the present value to investors of the future principal and interest payments.1.Sell at par 2.Sell at discount.Example:p111 3.sell at premium,Bonds discount as part of the cost of borrowing,Interest charges can be specified in a note payable in two ways:The interest may be stated as an annual percentage of rate of the face amount of the note,Or it may be included in the face amountWhenever bonds are issued at a discount,the total interest cost over the life of the bonds is equal to the total o the regular cash interest payments plus the amount of the discount.,Amortization of bond discount,The simplest method for it is the straight-line method,which allocates an equal portion of the discount to bond interest expense in each period.Example:p112,Bond issued as a premium,Example:p 113,Bond premium as reduction in the cost of borrowing,We have illustrated how issuing bonds at a discount,increases the cost of borrowing above the amount of the regular cash interest payments.Issuing bonds at a premium,on the other hand,reduces the cost of borrowing below the amount of the regular cash interest payments.Example:p 114,Year-end adjustment for bond interest expense,In the preceding illustration,it was assumed that one of the semi-annual dates for payment of bond interest coincided with the end of the companys accounting year.In most cases,however,the semi-annual interest payment dates will fall during an accounting period rather than on the last day of the year.Example:p 115,Early retirement of bonds payable,Bonds are sometimes retired before the maturity date.Most bond issues contain a call provision,permitting the corporation to redeem the bonds by paying a specified price,usually a few points above par.Example:p 116-117,Classification of bonds payable in a balance sheet,Bonds payable generally are classified as long-term liabilities,even when the bonds are within one year of maturity for two reasons.If new bonds are issued,the maturing bond liability has been refinanced.Accrued interest payable on long-term bonds is regarded as a current liability.,Commercial paper,It describes very short-term notes payable issued by financially strong corporations.It is similar to bonds payable in that is split a large loan into small units.It is regarded as a safer and more liquid investment are than stocks or bonds.,Lease payment obligations,A lease is a contract in which the lesser gives the lessee the right to use an asset for a specified period of time in exchange for periodic rental payments.Operating leaseCapital leaseIn accounting for merchandise“sole”through capital lease,the lesser debits Lease Payments Receivable and credits Sales for an amount equal to the present value of these future lease payments.,Deferred income taxes,A difference sometimes exists between the dates certain types of revenue or expense are recognized in financial statements and the dates these items are reported in income tax retunes.Example:p 119The recognition of income in income tax is postponed by those tax rules that enable taxpayers either to(1)delay the recognition of revenue,or(2)accelerate the recognition of expense.,Income Taxes Payable is a current liability representing the portion of the income taxes expense that must be paid when the company files its income taxes returns for the current year.,Deferred income taxes,