ARBUS102 Chapter Notes - Chapter 10: Accrued Interest, Canada Pension Plan, Current Liability
24 Feb 2016
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Liabilities play a significant role in financing business activities. Created when a company buys goods and services on credit, obtains short-term loans to cover gaps in cash flows, and issues long-term debt to obtain money for expanding into new regions and markets. Long-term obligations get a subheading of their own, people refer to them as noncurrent or long-term liabilities. The amount reported for each liability is the result of three factors: 1. The company records each liability at its cash equivalent, which is the amount of cash a creditor would accept to settle the liability immediately after a transaction or event creates the liability. Interest arises only when time passes, so no interest is recoded on the day the company purchases an item on account or the day the company receives a loan: 2. The company increases liabilities whenever additonal obligations arise, by purchasing goods and services or by incurring inters charges over time: 3.
