Nature of current liabilities, Financial Management

Assignment Help:

Current Liabilities:

A liability is an obligation to convey assets or do services at some future date. For purposes of balance sheet analysis, it is important to create a distinction between short-term or current liabilities and long-term liabilities.

The Nature of Current Liabilities

Current liabilities include those obligations which will need payment from existing current assets and all other obligations that are to be paid from present assets within one year. Usually, current liabilities arise from day-to-day business operations (i.e., Salaries Payable, Accounts Payable etc.). Others can result from the need for short-term loans (i.e., Notes Payable) and still others from management-created long-term obligations having a exact relationship to a short-term period (i.e., current maturity values of long-term loans).

Proper recognition and correct measurement of all current liabilities are essential in order to avoid overstatement of assets, long-term liabilities or net income (i.e., the entire balance sheet equity section). Further, current and long-term liabilities have to be accurately distinguished so that net working capital will be properly stated. Lastly, the preparation of meaningful cash budgets needs that a complete record of all current liabilities be kept.


Related Discussions:- Nature of current liabilities

Capital budgeting assignment, Assignment 2 Decision Tree Assessing Alterna...

Assignment 2 Decision Tree Assessing Alternatives in Capital Budgeting [see Bailes, J.C., and Nielsen, J.F. (2001, Winter). Using decision trees to manage capital budgets. Manag

Explain that many u.s. firms simply do not hedge, Recent surveys of corpora...

Recent surveys of corporate exchange risk management practices point out that many U.S. firms simply do not hedge. How would you explain this result? Answer:  There can be severa

Example on controlling working capital, Q. Example on Controlling working c...

Q. Example on Controlling working capital? Describe how a manufacturing company could control its working capital levels and impact of the suggested control measures. Solut

Certified public accountant, Certified Public Accountant (CPA) - ACCOUNTANT...

Certified Public Accountant (CPA) - ACCOUNTANT who has satisfied education, experience and examination requirements of her or his jurisdiction essential to be certified as a public

Types of government stocks, Types of Government Stocks Issue of Stock t...

Types of Government Stocks Issue of Stock through AuctionThe RBI, on behalf of the government, issues notification to auction government securities, stating the amount and time

Sales managers view on exchange risk, The sales manager considers that ther...

The sales manager considers that there will be substantial foreign exchange risk in trading with Werland. Payment is unpaid in Werland francs in three months time. The current ster

Define the benefits of the jit inventory control system, What are the benef...

What are the benefits of the JIT inventory control system? The just-in-time that is abbreviated as JIT inventory control system lowers inventory carrying costs and tends to inc

The financial services authority in the united kingdom, The Financial Servi...

The Financial Services Authority in the United Kingdom: The Financial Services Authority (FSA) in the United Kingdom (UK) is the financial watchdog. It is a company limited by

Abnormal earnings valuation model, A technique for knowing a company's wort...

A technique for knowing a company's worth that is based on earnings and book value. It is also known as the residual income model, it seems at whether management's decisions cause

Explain takeovers obligation, Takeover, Inc. is a Delaware corporation whos...

Takeover, Inc. is a Delaware corporation whose only stated purpose is to acquire companies.  It has virtually no assets and no employees other than the original founders who contri

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd