Nature of current liabilities, Financial Management

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.

Posted Date: 2/14/2013 12:26:23 AM | Location : United States







Related Discussions:- Nature of current liabilities, Assignment Help, Ask Question on Nature of current liabilities, Get Answer, Expert's Help, Nature of current liabilities Discussions

Write discussion on Nature of current liabilities
Your posts are moderated
Related Questions
What is Average Collection Period Ratio? Please provide me report on Average Collection Period Ratio.

Unity of Command Unity of command is the principle in which each subordinate should be responsible to only one manager.

The calculations for the cash flows Actual amount of cash paid or received during the period needs to be established. This can get quite  tricky  as  there  would be  accruals

Application of Shareholder Value Maximization Framework   Factors affecting Shareholder's Value are: Capital Market Conditions Profitability à Includes factors li

Explain how the working capital management policies affect the profitability and liquidity of the firm?

Ask question #Minimum ed# what is cost volume profits and what are the advantages and disadvantages?

Emerging market bonds are the bonds offered by less developed countries. The government normally issues them. These exclude borrowings from gove

I should write assignment on financial management ,but have no idea how to start and how to develop. Please help me

Q. What do you signify by Risk Analysis in Capital Budgeting? Risk Analysis: - Risk in an investment demotes to the variability that is likely to observe between the estimated

CLASSIFICATION OF BUDGETS Budgets can be categorized on the basis of several bases.  There are three important bases for classifying budgets.  They are - functions, time, and