Ch 9 Reporting and Analyzing Current Liabilities Study Guide
What are short term notes payable?
A written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.
What are unearned revenues?
Advanced payments for services that haven't been provided
What are accounts payable?
Amount that we owe for services we pay on credit
What is net pay?
Amount that you actually receive after taxes are applied
What is gross pay?
Amount that you are paid before taxes are applied
What are voluntary deductions and give examples?
Amounts withheld depend on the employee's request. Examples include union dues, savings accounts, pension contributions, insurance premiums, and charities
What is a liability?
Because of a past event, the company has a present obligation for future sacrifices.
What are sales tax payable?
Company collects tax to be paid to revenue department
What are vacation benefits?
Employer expenses for paid vacation by employees
What are health and pension benefits?
Employer expenses for pensions or medical, dental, life and disability insurance.
Why do we have to deduct certain taxes?
Employers are required to withhold these taxes from our check because they pay these amounts to the appropriate agency.
What are payroll liabilities?
Employers incur expenses and liabilities from having employees
What are known liabilities and give examples
Everything is certain. Known liabilities include accounts payable, sales tax payable, unearned revenues, short term notes payable, payroll liabilities
What are long term liabilities?
Expected not to be paid within 1 year or the company's operating cycle, whichever is longer.
What are current liabilities?
Expected to be paid within one year or the company's operating cycle, whichever is longer
What do the employee deduction taxes include?
FICA Taxes: Social Security, FICA Taxes: Medicare, Federal Income Tax, State and Local Income Taxes, Voluntary Deductions
What do the payroll taxes of an employer include?
FICA: Social Security taxes, FICA: Medicare taxes, Federal and State Unemployment taxes
What is the employer only tax?
Federal and State unemployment tax
What does the salaries/wages expense include?
Gross pay and then deducts taxes (FICA Taxes: Social Security, FICA Taxes: Medicare, Federal Income Tax, State and Local Income Taxes, Voluntary Deductions) and then this gives you the net pay.
How would you classify liabilities?
Into current liabilities and long term liabilities.
Current liabilities include what kinds of liabilities?
Known (determinable) liabilities, estimated liabilities, and contingent liabilities.
What are bonus plans?
Many bonuses paid to employees are based on reported net income.
What are estimated liabilities and give examples
Not certain of amount. It's a known obligation of an uncertain amount, but one that can be reasonably estimated. Examples include health and pension benefits, vacation benefits, bonus plans, and warranty liabilities.
What are contingent liabilities and give examples?
Potential obligation that depends on future event arising out of a past transaction or event. Something dependent on something else. Examples include warranty liabilities and lawsuits
What are the 3 payroll liabilities?
Salaries/wages expense, payroll taxes, benefits: vacation, medical insurance, retirement benefits, etc
What are warranty liabilities?
Seller's obligation to replace or correct a product (or service) that fails to perform as expected within a specified period. To conform with the matching principle, the seller reports expected warranty expense in the period when revenue from the sale is reported.
Why are notes issued?
To extend credit period and when cash is borrowed.
Why do we have adjusting journal entries?
To record interest expense incurred to date.
Do employers owe voluntary amounts withheld from employee's gross pay to the designated agency?
Yes
For the FICA: SS and FICA: Med taxes, does the employer pay amounts equal to that withheld from the employee's gross pay?
Yes
