ACCT-311 Chapter all: ACCT 316- Chapter Notes
Document Summary
Liability: obligation that arises from a past transaction that requires an outflow of assets or provisions of services: represents a duty or responsibility, little or no discretion to avoid, transaction of event has already occurred. Example: accounts payable is an obligation that arises when the entity purchases an item using credit and meets the definition of a liability. Accounts receivable does not meet the definition of a liability. Liability has 3 essential characteristics: exists a present time (i. e. at balance sheet date, represents economic burdens or obligations. Includes unconditional obligations and stand-ready obligations (liability contingent on some future even occurring or not occurring: these burdens/obligations are enforceable. I(cid:374)(cid:272)ludes (cid:272)o(cid:374)st(cid:396)u(cid:272)ti(cid:448)e o(cid:271)ligatio(cid:374)s (cid:894)o(cid:271)ligatio(cid:374)s (cid:271)ased o(cid:374) e(cid:374)tit(cid:455)"s present or past practices) Will be settled within on operating cycle; or. Will be settled within 12 months; or. Are classified as held for trading; or. Settlement cannot be deferred for at least 12 months.
