Current Liabilities and Contingencies

Current Liability

Present obligation expected to be liquidated with current assets or creation of current liability

Gross Method

Record accounts payable (and inventory) at the full invoice

Net Method

Record the purchase of goods at the net price, assuming any available discounts will be taken

Returnable Deposit

Cash from a customer to guarantee future required customer payments, or to compensate for possible damage to property

Gift Card Breakage

The value of unredeemed gift cards

Loss Contingency Accrual Criteria

Loss is both probable and reasonably estimable

Loss Contingency Disclosure Criteria

Loss is at least reasonably possible and either not probable/estimable, or exposure to a range of loss where only the minimum was accrued

Recognized Subsequent Event

Reflects conditions existing during Year 1, recognize the effect in the Year 1 financial statements.

Nonrecognized subsequent events

If the event does not reflect conditions existing during Year 1 and is required to keep financial statements from being misled, disclose the event in the Year 1 financial statements.

Assurance-Type Warranty

Recognize revenue on (combined) sale of product and warranty; recognize estimated warranty expense and liability at time of sale.

Service-Type Warranty

Recognize revenue on sale of product and deferred revenue on warranty; recognize warranty expense as costs are incurred and warranty revenue as performance obligation is satisfied.

Current Ratio

\frac{Current Assets}{Current Liabilities}

Quick Ratio

\frac{Cash + Marketable securities + Receivables}{Current Liabilities}