Lesson 13 – Liabilities

34 fill-in-the-blank flashcards covering definitions, recognition, measurement, classifications, examples, and analytical ratios related to liabilities.

Liabilities are present __ of the entity to transfer economic resources as a result of past events.

obligations

In the statement of financial position, liabilities are classified as __ or noncurrent liabilities.

current

Liabilities are recognized in the period in which money, goods, or services are __.

received

A liability is recognized when a __ against the company is established.

legally enforceable claim

Current liabilities are reported in the financial statements at their __ amount.

face

Noncurrent liabilities are measured at their __ value.

present (discounted)

Current liabilities are obligations expected to be settled within __ or one operating cycle, whichever is longer.

one year

Current liabilities are classified into determinable liabilities, __, and contingent liabilities.

provisions

Determinable liabilities are obligations whose amount and __ are reasonably certain.

payment date

Accounts payable, accrued liabilities, and unearned revenues are examples of __ liabilities.

determinable

__ represents obligations owed for goods, supplies, and services purchased on open account.

Accounts Payable

A written promise to pay a certain sum on a specified future date is called a __.

Note Payable

Notes may be classified as short-term or __ depending on the due date.

long-term

A short-term bank note with an explicit interest rate is reported at its __ amount.

face

A noninterest-bearing long-term note is recorded at its __ value.

present

Expenses already incurred but not yet paid at year-end are recorded as __ liabilities.

accrued

When a corporation declares a cash dividend, it records a debit to Retained Earnings and a credit to __ Payable.

Cash Dividend

Cash received in advance for services to be rendered creates a liability called __ revenue.

unearned

A liability of uncertain timing and amount arising from a past event is called a __.

provision

Warranty payable and premiums payable are common examples of __.

provisions

A liability dependent on the occurrence of a future event is a __ liability.

contingent

A possible contingent liability is usually disclosed in the __ to the financial statements.

notes (footnote)

Obligations maturing beyond one year are classified as __ liabilities.

noncurrent

Bonds payable, mortgage payable, and long-term notes payable are typical __ liabilities.

long-term

Bonds payable obligate the issuer to pay face value at maturity plus periodic __.

interest

The effective __ method is used to amortize bond discounts or premiums.

interest

A mortgage payable is secured by the __ being financed.

property

A noninterest-bearing long-term note reveals hidden interest recorded initially as __ on Notes Payable.

Discount

Discount on Notes Payable is a __ account deducted from Notes Payable.

contra

Working Capital equals Current Assets minus __.

Current Liabilities

The current ratio is calculated as Current Assets divided by __.

Current Liabilities

The ‘best’ current ratio is generally between __:1 and 2:1.

1.2

Debt to Total Assets ratio equals Total Liabilities divided by __.

Total Assets

The ratio that measures a firm's ability to pay interest when due is __ Interest Earned.

Times