Accounting English,sunxiaoyuan E-mail: sunjimingyeye163.com 8111326,Lesson one,Lesson seven liabilities,Accounting English,Lesson seven liabilities,Learning objectives 1The types of current liabilities 2How to account for account payable, unearned revenue 3Account for debentures (bonds)payable 4Issue bonds payable discount and premium,Accounting English,Words and phrase,Lesson seven liabilities,Accounting English,7.1 Current liabilities Current liabilities refer to the obligations that are reasonably expected to be paid on demand from existing current assets or through the creation of other current liabilities. As in the case of current assets, the time period for payment is one year or one operating cycle, whichever is longer. Current liabilities include: short-term notes payable, accounts payable ,wages payable, warranty liabilities, lease liabilities, taxes payable, and unearned revenues.,Lesson seven liabilities,Accounting English,7.1.1 Short term Bills(notes) and Accounts payable They are due in one year, but whenever bank loans are obtained, notes payable are issued. Notes payable are also issued on other occasions including the purchase of a real estate or a costly equipment, and sometimes other kinds of purchasing. Accounts payable are short-term debts to suppliers for purchase of goods or acquisition of services,Lesson seven liabilities,Accounting English,One of a merchants most common transactions is the credit purchase of inventory, recorded as follows with assumed amounts: Inventory 600 Account payable 600 Purchase on account,Lesson seven liabilities,Accounting English,Example: In addition to recording the bill payable and its eventual payment. The business must also pay interest expense and accrue interest expense and interest payable at the end of the period. The following entries are typical of this liability: 201 Sept.30 Inventory 8 000 Bills payable 8 000 Purchased inventory by issuing a one-year, 10% bill payable Dec.31 Interest expense($8 0000.103/12) 200 Interest payable 200 Adjusting entry to accrue interest expense at year-end,Lesson seven liabilities,Accounting English,The following entry records the bill payment at maturity: 202 Sept.30 Bills payable 8 000 Interest payable 200 Interest expense($8 0000.109/12) 600 Cash at bank $8 000+($8 0000.10) 8 800 Paid a bill payable and interest at maturity,Lesson seven liabilities,Accounting English,7.1.2 Accrued expenses They are rentals payable, tax payable, interests payable, and stuff and workers salaries, bonus and welfare funds.,Lesson seven liabilities,Accounting English,7.1.3 Unearned revenues Assume that ABC received cash before providing future service, ABC incurs a liability to earn the revenue. 201 Jan.1 Cash at bank 450 Unearned revenue 450 Received cash in advance,Lesson seven liabilities,Accounting English,7.1.4 Current maturities of Long-term debts Long-term liabilities to be matured and payable within a year shall be shown as a separate item under current liabilities.,Lesson seven liabilities,Accounting English,7.1.5 Contingent liabilities Obligations and their value are not yet determined, and are still dependent or contingent upon some future events. A contingent liability will either develop into a real liability, or be eliminated entirely by a future event. Examples are income tax, the liability for future warranty repairs on goods sold, etc. Current liabilities can also be classified on whether the amount is definite. In this way, there are current liabilities of definite value, estimated liabilities and contingent liabilities. Current liabilities are generally listed on the balance sheet either according to date from the earliest to the latest, or in the order of the value from the largest to the smallest.,Lesson seven liabilities,Accounting English,7.2 Long-term liabilities Long-term liabilities are companys obligations that extend beyond the current year or alternatively beyond the current operating cycle, including long-term loans payable, bonds payable, long-term accounts payable, etc. Besides, deferred income taxes, endowment insurance for the employees, liability for severance pay, liability for vacation pay are also included in long-term liabilities.,Lesson seven liabilities,Accounting English,7.2.1 Long-term loans payable Long-term loans payable include the loans borrowed from financial institutions and other units. It shall be accounted independently according to the different characters of the loan and at the amount actually incurred.,Lesson seven liabilities,Accounting English,7.2.2 Long-term accounts payable Long-term accounts payable include accounts payable for importing equipment, accounts payable for fixed assets financed by leasing. Long-term accounts payable shall be accounted at actual amounts.,Lesson seven liabilities,Accounting English,7.2.3 Bonds (debenture) payable The above two forms of fin