Term 
Definition 
Liabilities 
Probable debts or obligations that result from PAST transactions, which will be paid with assets or services. 
Current Liability 
Maturity of 1 year or less 
NonCurrent Liability 
Maturity greater than 1 year 
Debt 
Considered riskier than equity (interest is a legal obligation that MUST be repaired) 
How are Liabilities measured? 
at their cash equivalent (what the creditor would accept to cancel the debt immediately) 
Used to analyze liquidity 
Working Capital and Current Ratio 
Current Liabilities expected to be paid 
1) using a current asset (usually cash) or service2) within one year or operating cycle, whichever is longer 
Current Liability examples 
1. Accounts Payable2. Accrued Liabilitiesa) wages payableb) sales taxes payablec) payroll taxes payable d) interest payable3. unearned revenue4. current maturities of LT debta) portion of LT debt that will be due within next year 
Current Liabilities Rules: estimated (contingent) liabilities 
1. Recorded (record in JE)2. Contingent (add to footnotes)3. Do Nothing 
Recorded (record in JE) 
Probable and can be estimated (probable that you will lose and have to pay) 
Contingent (add to footnotes) 
Probable and can NOT be estimated 
Do Nothing 
Remote chance 
InterestBearing Notes 
Principal & Interest due at maturity 
NonInterestBearing Notes 
Interest is deducted in advance 
Simple Interest 
Interest accrued over time on principal only (not in new amount) 
Present Value (PV) 
The equivalent value of a future amount discounted back to the present time (eliminates the compounding of interest over that time period) 
N 
time period (# of compounding periods) 
I 
Interest rate corresponding to number of periods 
Annuity 
series of equal payments 
How is interest usually expressed? 
an annual percentage rate (APR) 
Present Value of a single sum 

Ordinary Annuity 
Pmt. or receipt made at end of each period 
Present Value of Ordinary Annuity (PVOA) 
An amount that if invested at a compound interest now, would provide for series of equal payments at the end of each period in the future 