YE SUN AccountingEnglish
12
Unearned Revenue
Cash is sometimes collected from the customer before the revenue is actually earned.
As the earnings process is
D a te
D e s c rip tio n
1 -N o vC a s h
N o teP a y a b le
D e b it
C re d it
1 0 ,0 0 0
1 0 ,0 0 0
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7
Interest Payable
Interest expense is the compensation to the lender for giving up the use of money for a period of time.
of 12.0% per annum.
signed John Caldwell
title
treasurer
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6
Notes Payable
On November 1, 1999, Porter Company would make the following entry.
The liability is called interest payable.
To the lender, interest is a revenue.
To the borrower, interest is an expense.
Interest Rate Up!
YE SUN AccountingEnglish
Lesson 7
Liabilities
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1
The Nature of Liabilities
Defined as debts or obligations arising from past transactions or
events.
Maturity = 1 year or less
In teres t P a y a b le
D eb it
C red it
2 0 0
2 0 0
$10,000 ´ 12% ´ 2/12 = $200
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10
Payroll Liabilities
Employers incur several
expenses and liabilities from
completed . . .
Cash is received
in advance.
Deferred revenue is recorded.
Earned revenue is recorded.
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13
Deferred Income Taxes
Corporations pay income
9
Interest Payable Example
On December 31, Porter Company would record interest payable with the following
entry:
D ate
D es c rip tio n
3 1 -D ecIn teres t E x p en s e
Maturity > 1 year
Current Liabilities
Noncurrent I.O.U. Liabilities
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2
Distinction Between Debt and Equity
The acquisition of assets is financed from two sources:
taxes following tax
law.
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14
Deferred IncomFra bibliotek TaxesGAAP is the set of rules for preparing financial statements.
The tax law is the set of rules for preparing
DEBT
EQUITY
Funds from creditors, with
Funds from
a definite due date, and
owners
sometimes bearing
interest.
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3
Notes Payable
PROMISSORY NOTE
8
Interest Payable Example
What entry would Porter Company make on December 31, the fiscal year-end?
D ate
D es c rip tio n
D eb it
C red it
YE SUN AccountingEnglish
Miami, Fl Location
Nov. 1, 1999 Date
Six months after this date
Porter Company
promises to pay to the order of Security National Bank
the sum of
$10,000.00
with interest at the rate
having employees.
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11
Payroll Liabilities
Gross Pay
Net Pay
Personal in come Taxes
Housing fund
Unemployment Voluntary Insurance,etc. Deductions
tax returns.
Results in . . .
Usually. . .
Financial statement income tax expense.
Results in . . .
income taxes payable.