Chapter 7 - Accounting for and presentation of liabilities. After reading this chapter, you should be able to answer the following questions: What is the financial statement presentation of short-term debt and current maturities of long-term debt? What is the difference between interest calculated on a straight basis and on a discount basis? What are unearned revenues and how are they presented in the balance sheet? . | 2008 The McGraw Hill Companies Inc. All Rights Reserved. McGraw Hill Irwin Copyright 2014 by The McGraw Hill Companies Inc. All rights reserved. Chapter 7 Accounting for and Presentation of Liabilities PowerPoint Authors Susan Coomer Galbreath . CPA Charles W. Caldwell . CMA Jon A. Booker . CPA CIA Cynthia J. Rooney . CPA McGraw Hill Irwin Copyright 2014 by The McGraw Hill Companies Inc. All rights reserved. 1-3 LO 1 Nature of Liabilities Liabilities are obligations that represent Liabilities are obligations that represent probable future sacrifice of economic probable future sacrifice of economic benefits benefits. . The term accrued expenses The term accrued expenses is often used is often used on the balance sheet to describe liabilities. on the balance sheet to describe liabilities. Current liabilities are those liabilities that Current liabilities are those liabilities that will be will be paid within one year paid within one year of the current of the current balance sheet date. balance sheet date. McGraw Hill Irwin 7 3 2008 The McGraw Hill Companies Inc. All Rights Reserved. 1-4 LO 1 Nature of Liabilities Current liabilities include Accounts payable Short-term debt Notes payable Current maturities of long-term debt Unearned revenue or deferred credits Other accrued liabilities Noncurrent liabilities include Long-term debt Bonds payable Deferred tax liabilities McGraw Hill Irwin 7 4 2008 The McGraw Hill Companies Inc. All Rights Reserved. 1-5 LO 2 Interest Calculation Methods Straight Interest Interest Principal Rate Time in years 25 000 1 2 250 per year or per month Annual Percentage Interest Rate APR APR Interest Paid Money available Time 2 250 25 000 1 9 McGraw Hill Irwin 7 5 2008 The McGraw Hill Companies Inc. All Rights Reserved. 1-6 LO 2 Current Maturities on Long-Term Debt Any portion of long-term debt that is to be repaid within a year of the balance sheet date is reclassified from the noncurrent liability section to the
