COMMERCE 1AA3 Lecture Notes - Lecture 13: Accounts Payable, Matching Principle, Current Liability
5 Apr 2016
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Debts that can reasonably be expected to be paid: from existing current assets by creating other current liabilities and, within one year. Have a know amount, payee, due date. Obligations in the form of written promissory notes. Usually require the borrower to pay interest. Used instead of accounts payable: gives lender proof of obligation in case legal action is needed to collect. Issued for varying periods: if due within one year of the balance sheet date, classified as current liabilities. To record issue of 4-month, 6% note to caisse. Interest is recorded in the period the loan is outstanding. At maturity, the face value of the note plus interest must be repaid: To accrue interest for april, may and june. The portion of long-tem debt that is due within the current year: amount not due within current year is disclosed as a long-term liability.
