INTERMEDIATE ACCOUNTING 2

1. When does an item of liability recognized? Explain the two conditions before a liability is
recognized.
- Based on my understanding, a contract liability occurs in the financial statements when a
customer has paid but the performance obligation has not been completed. A contract asset
occurs in the financial statements when a performance obligation has been satisfied before
the customer has not paid. This is common in long-term construction contracts. Contract
assets are also called progress payments that have not been billed yet.

2. Distinguish between financial liability and non-financial liability.

- Financial liabilities are a corporate organization's contractual commitments to provide
money or other assets to the involved party. The contractual responsibilities of a business
entity that do not call for the supply of money or other financial resources to the interested
party are known as non-financial liabilities.

3. Give five examples each of financial liability and non-financial ability.

- Some examples of financial liabilities are trades payable, debentures loans payable, non-
equity shares, etc. Some of the examples of non-financial liabilities are taxes payable,
warranty obligations, equity shares, etc.

4. Describe the initial measurement of current and non-current liability.

- Current liabilities are the debts that a business expects to pay within 12 months while non-
current liabilities are longer term. Both current and non-current liabilities are reported on
the balance sheet. Non-current liabilities may also be called long-term liabilities.

5. Explain the subsequent measurement of current and non-current liability.

- Non-current liabilities are those that a company expects to pay off over a longer period of
time than current liabilities. On the balance sheet, liabilities are broken down into current
and non-current categories. Long-term liabilities are another name for non-current
obligations.
- Short-term debt, accounts payable (money owing to suppliers), unpaid wages, unpaid
income and sales taxes, and already sold products and services are some examples of
current liabilities. Long-term loans and leases, lines of credit, and deferred tax liabilities are
a few examples of non-current liabilities.