 Current liabilities, payroll, and long-term liabilities

o Current liabilities of known amount

 Account payable
 Amount owed for products and services purchased on account.
 Normal balance
 Whatever increases the account
 Short –term notes payable
 Common form of financing; company incurs interest expense.
 Sales tax payable
 Tax levied by state on retail sales; company collects from customer and
remits to government.
 Current portion of long-term notes payable
 Principal portion of long-term debt due in the next year.
 Accrued expenses
 Expense incurred, but yet not paid; often an adjusting entry.
o Examples: salaries and interest payable
 Unearned revenues
 Customers make payments before receiving products or service.
 P+(P*R*T)
 Estimated Warranty Payable
o Company guarantee products through warranty agreements
o Warranty expense is estimated in same period as sale of product
 Matching principle
 Contingent liabilities
o Potential liability
o Depends on a future event
o Accounting treatment depends on likelihood that the future event will create a liability:
 Remote – No disclosure required
 Reasonably possible – Describe in notes to the financial statements
 Probable – record an expense and a liability based on estimated amounts