Ch 8: Current Liabilities in Financial Accounting

A set of vocabulary flashcards focusing on key concepts related to current liabilities in financial accounting.

Current Liabilities

Liabilities that are usually payable within one year from the balance sheet date.

Long-Term Liabilities

Liabilities that are payable in more than one year from the balance sheet date.

Operating Cycle

The length of time from spending cash to provide goods and services to collection of cash from customers.

Accounts Payable

Amounts owed to suppliers of merchandise or services, typically considered current liabilities.

Deferred Revenue

Cash received in advance from customers for products or services to be provided in the future.

Notes Payable

A note signed by a firm promising to repay the amount borrowed plus interest.

Interest Expense

The cost incurred for borrowed funds, calculated based on the principle amount, interest rate, and time.

Sales Tax Payable

Sales tax collected from customers by the seller, which is a current liability payable to the government.

Warranty Liability

The liability for services that a company promises to deliver upon sale of a product.

Contingent Liabilities

Existing situations for which the outcome is uncertain and that outcome might result in a loss.

Commercial Paper

Short-term unsecured promissory notes issued by corporations to raise short-term funds.

Line of Credit

An informal agreement permitting a company to borrow up to a prearranged limit.

Current Portion of Long-Term Debt

The portion of long-term debt that is due within the next 12 months.

Recognition of Revenue

The process of recording revenue when the related performance obligations are satisfied.

Contingent Gains

An uncertain situation that might result in a gain, recorded only when the gain is known with certainty.