Accrued Liabilities

Accrued Liabilities

• are expenses of entities already incurred during the period but has to
be billed yet to the company.
KINDS OF ACCRUED LIABILITIES:
1. Routine or recurring– occurs as a normal operational expense of the
business. The best example is the periodic accrued wages of employees.
2. Non routine or infrequent – is the opposite and does not occur as a
normal operational part of the business. An example is a company’s one-
time purchase from a supplier where a bill is yet to be received.
Payroll Taxes
• Employee’s Income tax payable
• Employee SSS contribution, PhilHealth, & Pag-
ibig (HDMF)
EXAMPLE
An entity reported the following its payroll for the month of January:
Gross payroll 2,000,000
Income tax withheld 80,000
SSS contribution 16,000
PhilHealth 8,000
Pag-IBIG contribution 4,000

The entity also makes the following additional contribution:

SSS 24,000
PhilHealth 12,000
Pag-IBIG 8,000
To record gross payroll:

Salaries expense 2,000,000

Withholding tax payable 80,000
SSS premium payable 16,000
PhilHealth premiums payable 8,000
Pag-IBIG premiums payable 4,000
Cash 1,896,000
To record employer’s additional contribution:

Payroll tax expense 44,000

SSS premiums payable 24,000
PhilHealth premiums payable 12,000
Pag-IBIG premiums payable 8,000
To record remittance:

Withholding tax payable 80,000

SSS premiums payable 40,000
PhilHealth premiums payable 20,000
Pag-IBIG premiums payable 12,000
Cash 152,000
 Value Added Taxes
An entity is required to pay Value Added Tax from customers on
sales of tangible property and of certain services.
The VAT output and VAT input is netted against one another to
determine amount of net liability.
EXAMPLE

During the current month, an entity sold goods for 4,480,000

including VAT of 480,000 on account to customers.

In the same month, total purchases of the company amounted to

1,344,000 including VAT of
144,000. All purchases were made on account.
• To record sales:

Accounts receivable 4,480,000

Sales 4,000,000
Output VAT 480,000
• To record purchases:

Purchase 1,200,000
VAT input 144,000
Accounts payable 1,344,000
• To record net liability:

Output Vat 480,000

Input VAT 144,000
VAT payable 336,000

• To record payment:

VAT payable 336,000

Cash 336,000
Gift Certificates Payable

Note that gift certificates no longer have

expiration dates.
• When gift certificates are sold:

Cash xxx
Gift certificates payable xxx

• When gift certificates are redeemed:

Gift certificates payable xxx

Sales xxx

• When gift certificates expire or not redeemed:

Gift certificates payable xxx

Forfeited gift certificates xxx
Refundable deposit

This consists of cash or property received from

customers but w/c are refundable after
compliance with certain conditions
EXAMPLE

A deposit of 10,000 is required from the customer for returnable containers. The containers
cost 8,000.

ENTRY

Cash 10,000
Container’s deposit 10,000

When customer does not return the returnable containers

Container’s deposit 10,000

Container 8,000
Gain on sale 2,000
Bonus Expense
Bonus: Bonus can be computed using these 4 formula/ bases:
1. Bonus = based on Net Income before bonus and tax
= Net income (bonus rate)

2. Bonus = based on net income after bonus before tax

= bonus rate (Net income – bonus)

3. Bonus = Based on Net income after tax but before bonus

= Bonus rate (Net income – tax)

4. Bonus = Based on Net income after bonus after tax

= Bonus rate ( Net income – bonus – tax)
Deferred Revenue
These are income already earned but not yet
received; unearned income
ENTRIES:

Cash xxx
Unearned service revenue xxx

Unearned service revenue xxx

Service contract revenue xxx