COMM 211 Lecture Notes - Lecture 8: Contingent Liability, Finance Lease, Accounts Payable
Document Summary
Obligations that need to be settled through the transfer of assets or performance of services. Presented on the balance sheet as current and long-term assets. Notes payable and bank loans (if due within one year) Long term portions of notes payable, bank loans, debt, capital lease. Current liabilities of known amount: liabilities are carried at gross amount of the obligation ex. Current liabilities that must be estimates: an allowance is estimated and provided based on past experience ex. Warranty expense is recognized in the same period of sales revenue based on estimate of historically defective products. A liability that is contingent on the outcome of a future event ex. A lawsuit in progress the outcome is unknown at the reporting date and is based on a future court ruling. Unless the probability of an obligation is remote, the contingent liability should be disclosed in the notes of the financial statements.