Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

TIPS ON CHAPTER TOPICS

TIP: Current liabilities are often called short-term liabilities or short-term debt. Non-current liabilities are often called long-term liabilities or long-term debt.

TIP: Current liabilities are obligations which come due within one year and whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets, or the creation of other current liabilities. Noncurrent liabilities (or long-term liabilities) are obligations which do not meet the criteria to be classified as current.

TIP: Companies often have a portion of long-term debt that is due each year. At a balance sheet date, any portion of long-term debt that is due within one year of that balance sheet date is referred to as “current maturities of long-term debt” or “current portion of long-term debt” or “long-term debt due within one year” and is classified as a current liability.

TIP: A liability is recognized (recorded) when a legally binding obligation is incurred. Examples include:

• (a) When cash is received from a creditor as a loan.
• (b) When cash is received from a customer in advance of the date that goods or services are provided to the customer.
• (c) When legal title to some asset other than cash is received (change in legal title usually occurs at the point that the asset is delivered to the buyer) and payment is deferred.
• (d) When services are received and payment is deferred.
• (e) As time passes (for example, interest accrues with passage ...