Crash Course in Accounting and Financial Statement Analysis, Second Edition

Liabilities and Shareholders’ Equity Represent the Company’s Sources of Funds (i.e., How It Pays for Assets)

Liabilities represent what the company owes to others (Exhibit 6.3):

• They must be measurable.

• Their occurrence is probable.

  Shareholders’ equity represents sources of funds through:

• Equity investment

• Retained earnings (what the company has earned through operations since its inception)

Exhibit 6.3. Liabilities and Shareholders’ Equity Typically Consist of (But are Not Always Limited to):

LIABILITIES
Accounts Payable	A company’s obligations to suppliers for services and products already purchased from them, but which have not been paid; represent the company’s unpaid bills to its suppliers for services obtained on credit from them.
Notes Payable	Debt or equity securities held by the company
Current Portion of Long-Term Debt	Portion of debt with an overall maturity of more than a year; portion due within 12 months
Long-Term Debt	The company’s borrowings with a maturity (full repayment) exceeding 12 months
Deferred Taxes	Potential future tax obligations arising when taxes payable to the IRS are lower than those recorded on financial statements
Minority Interest	Equity interest in the portion of the consolidated businesses that the company does not own
SHAREHOLDERS’ EQUITY
Preferred Stock	Stock that has special rights and takes priority over common stock
Common Stock Par Value	Par value of units of ownership of a corporation
Additional Paid-In Capital (APIC)	Represents capital received by a company ...