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Financial Accounting IFRS Edition 10a PDF

Murdock financed his business ventures through multiple credit cards, accumulating debt over many years by making minimum payments. While credit card debt is normally a current liability due monthly, Murdock treated it as a long-term source of financing through consistent minimum payments and accumulating interest. The document then discusses how liabilities in general represent creditors' claims on assets that must be settled in the future, classifying them as either current liabilities due within one year or non-current liabilities due after. It provides an overview of the chapter which will cover current and non-current liabilities in more detail.

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267 views1 page

Financial Accounting IFRS Edition 10a PDF

Murdock financed his business ventures through multiple credit cards, accumulating debt over many years by making minimum payments. While credit card debt is normally a current liability due monthly, Murdock treated it as a long-term source of financing through consistent minimum payments and accumulating interest. The document then discusses how liabilities in general represent creditors' claims on assets that must be settled in the future, classifying them as either current liabilities due within one year or non-current liabilities due after. It provides an overview of the chapter which will cover current and non-current liabilities in more detail.

Uploaded by

Acho Jie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Inventor-entrepreneur Wilbert Murdock, as you can tell from the Feature Story, had t o use multiple credit

cards to finance his business ventures. Murdock's credit card debts would be classified as current liabilities
because they are due every month. Yet by making minimal payments and paying high interest each month,
Murdock used this credit source long-term. Some credit card balances remain outstanding for years as they
accumulate interest.
In Chapter I,we defined liabilities as creditors' claims on total assets and as existing debts and obligations.
These claims, debts, and obligations must be settled or paid at some time in the future by the transfer of
assets or services. The future date on which they are due or payable (maturity date) is a significant feature
of liabilities. This "future date" feature gives rise to two basic classifications of liabilities: (1) current liabilities
and (2) non-current liabilities. Our discussion in this chapter is divided into these two classifications.
The content and organization of Chapter 10 are as follows.

Notes payable
Sales taxes payable
Unearned revenues
Current maturities of long-term
debt
Statement presentation and
analysis

Bond basics
Accounting for bond issues
Accounting for bond
retirements
Accounting for long-term notes
payable
Statement presentation and
analysis

SECTION 1 Current Liabilities

Explain a current li
identilj the major
current liabilities.

As explained in Chapter 4, a current liability is a debt that the company


expects to pay within one year or the operating cycle, whichever is longer.
Debts that do not meet both criteria are classified as non-current liabilities. Most companies pay current liabilities within one year by using current assets, rather than bv creating- other liabilities.
Companies must carefully mdnitor the relationship of current liabilities to current assets. This relationship is critical in evaluating a company's short-term debtpaying ability. A company that has more current liabilities than current assets may
not be able to meet its current obligations when they become due.
Current liabilities include notes payable, accounts payable, and unearned
revenues. They also include accrued liabilities such as taxes, salaries and wages, and
interest payable. In previous chapters we explained the entries for accounts
payable and adjusting entries for some current liabilities. In the following sections,
we discuss other types of current liabilities.

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