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
Shareholders versus Managers A Limited Liability company is possessed by the shareholders though in most of the cases is managed by a board of directors selected by the shareho

Ask queswtion #Minimum 100 words accepted# what are the characteristics of debt finance? What are the similarities and differences between debt finance and ordinary share capital

A. Mitt starts Examine Your Zipper Incorporated ("XYZ") in 2012 by selling common stock of $12,000,000. He promises the investors in his company a 15% return on their capital. B

Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of $1,800,000. Addition of new species will cost another $310,000. Addi

Insider Trading Insider trading refers to dealing in securities by persons who are privy to specific information of companies. This possession of confidential information gives


Due to the complexity of the tasks involved in many projects, communication of responsibility for those tasks is often helped by means of graphical planning techniques.

Are there any legal factors which could restrict a corporation in its effort to pay cash dividends to common stockholders?  Explain. A firm might be legally restricted as to the

Researchers found that it is extremely difficult to forecast the future exchange rates more precisely than the forward exchange rate or the current spot exchange rate. How would yo

You work for a small, for-profit health system. Your system is interested in acquiring a Critical Access Hospital (CAH) at a price of $65,000,000. The purchase would be made from r