Course: Financial Accounting

To p i c : Current Liabilities And Payroll

Accounting
C o u r s e I n s t r u c t o r : Takor Ronald
Cohort: MAKE-IT
Presented by: Joseph Randy
 CURRENT LIABILITIES AND PAYROLL
ACCOUNTING

A current liability is a debt that a company expects to pay

within one year or the operating cycle, whichever is longer. A

company that has more current liabilities than current assets
often lack liquidity, or short-term debt-paying ability. In
addition, users want to know the types of liabilities a company
has
 Types of Current Liabilities
Notes Payable
Sales Taxes Payable
Date Detail Dr Cr
June 27 Cash 25 500
Sales rev 25000
Sales tax payable 500
Unearned Revenues
Illustration
Supposed Plethora Capital organizes a 1 day seminar on Forex trading for 30 personnel, with a
training fee of 5000frs per person payable upfront. The business will make the following entries.
 Date  Detail  Dr  Cr

October 11 Cash 150 000  

  Unearned ticket revenue   150 000

  (To record training fee of 150    

000)
Once the training is completed, Plethora capital is going to
record the recognition of revenue as follows
 Date  Details  Dr  Cr

October 15 Unearned ticket 150 000  

revenue

  Ticket revenue   150 000

  (To record training    

150 000 revenue)
 Current Maturities of Long-Term Debt
These are long term debt which are almost due with a maturity period of a year or less.

Reporting Uncertainty

Reporting A Contingent Liability

Reporting of Current Liabilities

 Analysis of Current Liabilities
Current and noncurrent classifications can be used to determine a company’s liquidity position.
Liquidity is defined as the ability to pay maturing obligations and meetup with unexpected financial
(cash) situations. In business, the excess of current assets over current liabilities is called working
capital.

Formula
Working Capital = Current Assets – Current Liabilities

Current Ratio
This ratio permits us to determine the liquidity of different sized companies and small/individual
companies at different times.

Current Ratio = Current Asset

Current Liabilities
 How to account for Payroll
A payroll is the list of employees of some company that is entitled to receive payments
as well as other work benefits and the amounts that each should receive. Every
company is required to keep the payroll records of all employees so as to meetup with
the states payroll taxes.

Determining the
Payroll
Determining the payroll involves computing three amounts: (1) gross earnings, (2) payroll
deductions, and (3) net pay
Type of pay Hours Rate Gross earnings

Regular 50 $15 $750

Overtime 5 18 $90

Total wages     $840

 PAYROLL DEDUCTIONS
The amount finally received by employees are usually smaller than the gross
earnings. This is because of the payroll deductions made before employees
receive their final pay check
INCOME TAXES
An income tax is a tax imposed on individuals or entities in respect of the
income or profits earned by them. Four variables determine the amount to be
withheld
• The employee’s gross earnings
• Marital status
• The number of allowances claimed by the employee
• The length of the pay period.

NET PAY
Academy Company determines net pay by subtracting payroll deductions from
gross earnings
 Discuss additional fringe benefits associated with
employee compensation

Two of the most important paid benefits are:

• Absences

Date Details Dr Cr
31 Nov Vacation Benefits 150 000
Payable
Cash 150 000

• Postretirement benefits
Thank
You!
Make-IT Cohort

info@makeit.com

www.makeit.cm

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