Liabilities

Per revised Philippine Accounting Standards (PAS) No. 1, an entity shall classify a liability
as current when:

a. it expects to settle the liability in its normal operating cycle;

b. it holds the liability primarily for the purpose of trading;
C. the liability is due to be settled within twelve mónths after the reporting period; or
d. the entity does not have an unconditional right to defer settlement of the liability
for at least twelve months after the reporting period.

All other liabilities should be classified as non-current liabilities.

Current Liabilities

Accounts Payable. This account represents the reverse relationship of the accounts
receivable. By accepting the goods or services, the buyer agrees to pay for them in the
near future.

Notes Payable. A note payable is like a note receivable but in a reverse sense. In the
case of a note payable, the business entity is the maker of the note; that is, the business
entity is the party who promises to pay the other party a specified amount of money on
a specified future date.
Accrued Liabilities. Amounts owed to others for unpaid expenses. This account
includes salaries payable, utilities payable, interest payable and taxes payable.
Unearned Revenues. When the business entity receives payment before providing its
customers with goods or services, the amounts received are recorded in the unearned
revenue account (liability method). When the goods or services are provided to the
customer, the unearned revenue is reduced and income is recognized.
Current Portion of Long-Term Debt. These are portions of mortgage notes, bonds and
other long-term indebtedness which are to be paid within one year from the balance
sheet date.

Non-current Liabilities
Mortgage Payable. This account records long-term debt of the business entity for
which the business entity has pledged certain assets as security to the creditor. In the
event that the debt payments are not made, the creditor can foreclose or cause the
mortgaged asset to be sold to enable the entity to settle the claim.
Bonds Payable. Business organizations often obtain substantial sums of money from
enders to finance the acquisition of equipment and other needed assets. They obtain
these funds by issuing bonds. The bond is a contract between the issuer and the lender
pecifying the terms of repayment and the interest to be charged.