Accrued Liabilities

Topics: Generally Accepted Accounting Principles, Stock, Corporation Pages: 2 (766 words) Published: April 14, 2013
Accrued Liabilities: an accrued liability usually results from an expense the business has incurred but not yet paid.Therefore,an accrued expense creates a liability.For example,WestJet’s salaries ans wages payable occur as employees work for the company. Interest expense accrues with the passage of time.There are several categories of accrued expenses:salaries and wages payable,interest payable,income taxes payable. Payroll Liabilities: is a major expense.For service organizations-such as law firms,real estate brokers,and accounting firms-compensation is the major expense,just as cost of goods sold is the major expense for a merchandising company. Estimated Warranty Payable: many companies guarantee their products under warranty agreements.The warranty period may extend for 90 days to a year for consumer products.Automobile companies accrue liabilities for vehicle warranties,which usually extend for several years. The Time Value of Money:a dollar received today is worth more than a dollar to be received in the future because you may invest today’s dollar immediately and earn income from it.But if you must wait to receive the dollar, you forgo the interest revenue. Callable: it means that the bonds’ issuers may call,or pay off,those bonds at a prearranged price whenever the issuers so choose. Convertible bonds: some corporate bonds may be converted into the issuing company’s common shares. These bonds are called convertible bonds. Separate Legal Entity: a corporation is a business entity formed under federal or provincial law. Continuous Life and Transferability of Ownership:corporations have continuous lives regardless of changes in their ownership.The shareholders of a corporation may transfer shares as they wish.They may sell or trade the shares to others or dispose of them in any other way. Limited Liability:shareholders have limited liability for the corporations’s debts. They have no personal obligation for corporate liabilities. The most that a share...
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