Chapter 13

Probable future Sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

obligations whose liquidation is expected to require current assets

• Accounts payable
• Notes payable
• current maturities of long-term debt
• short-term obligations expected to be refinanced
• dividends payable
• customer advances and deposits
• unearned revenues
• sales tax payable
• income taxes payable
• employee-related liabilities

Balances owed to others for goods, supplies or services

Can be recorded using gross or net method

• ??? XXX
• Accts Payable XXX

• when paid:
• Accts payable XXX
• Cash XXX
• Sales discounts XXX

• Inventory XXX
• A/P XXX
• (recorded less the sales discount)

• if paid past the discount date:
• A/P XXX
• Cash XXX
• Sales Discounts forfeited XXX

The amount of the note and the amount of cash received are the same

Interest accrues over time

The amount of the note and cash are different. The difference is recorded as a discount or premium on notes payable and is amortized over the life of the note and charged to interest expense.