Current Liabilities and Contingencies

2096 words 9 pages
ACCT 2015 INTERMEDIATE FNANCIAL ACCOUNTING 11
Current Liabilities, Contingencies & Provisions
Required Reading: Alfredson – Chap 5, Keiso – Chaps 13, IAS 37

Learning Objectives
1. CURRENT LIABILITIES:
– Define and explain types of current liabilities. – Account for the major types

2. IAS 37 PROVISIONS & CONTINGENCIES
– Define Provisions and answer the following questions:
• • • Why do them When to provide How much to provide

– Calculate and account for Restructuring Provisions – Define Contingent Assets & Liabilities and apply relevant measurement and recognition rules – Apply IAS 37 Disclosure Requirements

CURRENT LIABILITIES
LIABILITY – Claims against the business arising out of a past transaction that will cause an
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The corporation also made cash sales which totaled $19,610 including the 6% sales tax. (a) prepare the entry to record Flintstones’ credit sales. (b) Prepare the entry to record Flintstones’ cash sales.

Accounts receivable Sales Sales tax payable
($30,000 x 6% = $1,800)

31,800 30,000 1,800 19,610 18,500 1,110

Cash Sales Sales tax payable
($19,610 ÷ 1.06 = $18,500)

4

CURRENT LIABILITIES
Payroll Deductions - Example Assume a weekly payroll of $10,000 entirely subject to PAYE (25%), NIS (5%). The company records the salaries and wages paid and the employee payroll deductions as follows:
Journal entry to record salaries and wages paid: Salaries and wages expense PAYE (BIR) NIS payable (NIB) Cash 10,000 2,500 500 7,000

IAS 37 STANDARD
1. Ensure that appropriate Recognition criteria & Measurement bases used for:
– Provisions – Contingent Liabilities & Assets

2. Sufficient Disclosure is provided to enable user to understand their nature, timing & amount

SCOPE OF STANDARD
Applied to ALL entities EXCEPT • Financial Instruments (IAS 39) • Executory Contracts (where both parties have not fulfilled or fulfilled to an equal extent their obligation) • Specifically covered under a separate standard e.g. Leases, Construction Contracts, Employee Benefits, Revenue Recognition

5

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