ADM 1340 Lecture Notes - Lecture 10: Promissory Note, Current Liability, Qst

• School: University of Ottawa
• Department: Administration
• Course: ADM 1340
• Professor: Lamia Chourou

Document Summary

Liabilities: obligations that result from past transactions: current liabilities. Debt that will be paid w/in 1 year from: existing current assets (cash) or thru creation of other current liabilities (note payable, non-current liabilities. De(cid:271)ts that do(cid:374)"t (cid:373)et (cid:271)oth of afo(cid:396)e(cid:373)e(cid:374)tio(cid:374)ed (cid:272)(cid:396)ite(cid:396)ia: ex. installment note payable & bonds payable. Ba(cid:374)k i(cid:374)de(cid:271)ted(cid:374)ess, a/p, a(cid:272)(cid:272)(cid:396)ued lia(cid:271)ilities (cid:894)ta(cid:454)es, sala(cid:396)ies, i(cid:374)te(cid:396)est, (cid:895), u(cid:374)ea(cid:396)(cid:374)ed (cid:396)e(cid:448)e(cid:374)ue, (cid:374)otes o(cid:396) loa(cid:374)s payable, current portion of non-current debt. Pre-authorization by bank that allows companies to borrow money up to a pre-set limit, when it is needed. Interest is usually charged at a floating (variable) interest rate on any amounts used from the line of credit. Collateral (cid:862)se(cid:272)u(cid:396)it(cid:455)(cid:863): usually required by bank as protection in event of default on loan: ba(cid:374)k (cid:272)a(cid:374) get if (cid:272)o(cid:373)pa(cid:374)(cid:455) (cid:272)a(cid:374)"t pa(cid:455) Bank indebtedness: negative or credit bank balance (debit to bank) which is reported as current liability on sfp. No special journal entry is required to record an overdrawn amount.