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Problem Solving Survival Guide to accompany Intermediate Accounting, Volume 1: Chapters 1 - 14, 15th Edition by Terry D. Warfield, Jerry J. Weygandt, Donald E. Kieso

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CHAPTER 13

CURRENT LIABILITIES AND CONTINGENCIES

OVERVIEW

Initially, the resources (assets) of a business have to come from entities outside of the particular organization. Two main sources of resources are creditor sources (liabilities) and owners' sources (owners' equity). In this chapter, we begin our in-depth discussion of liabilities.

Due to the nature of some business activities, it is common to find some goods and services being received while payment for these items is made days or weeks later. Therefore, at a specific point in time, such as a balance sheet date, we may find that a business has obligations for merchandise received from suppliers (accounts payable), for money it has borrowed (notes payable), for interest incurred (interest payable), for sales tax charged to customers which has not yet been remitted to the government (sales taxes payable), for salaries and wages (salaries and wages payable), and for other amounts due to government agencies in connection with employee compensation. Such payables are reported as current (short-term) liabilities, because they will fall due within the next 12 months and will require the use of current assets (cash, in these cases) to liquidate them. Accounting for these and other current liabilities is discussed in this chapter.

SUMMARY OF LEARNING OBJECTIVES

  1. Describe the nature, type, and valuation of current liabilities. Current liabilities are obligations whose liquidation a company reasonably expects to require the use of ...

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