Accounting Terms: Liability, Refinancing, FICA, Absences, Contingencies, Warranty, Ratios, Quizzes of Financial Accounting

Download Accounting Terms: Liability, Refinancing, FICA, Absences, Contingencies, Warranty, Ratios and more Quizzes Financial Accounting in PDF only on Docsity! TERM 1 Liability DEFINITION 1 Three essential characterisitics:1. Present obligation that entails settlement by probable future transfer of assets.2. an unavoidable obligation.3. the transaction creating the obligation has already occurred (in the past). TERM 2 Current Liabilty DEFINITION 2 obligations whose liquidation is reasonable expected to require the use of existing resources properly classified as current assets, or the creation of other current liabilities. TERM 3 When may a company exclude a short term obligation from current liabilites? DEFINITION 3 If it is going to be refinanced. TERM 4 What is the criteria for refinancing? DEFINITION 4 1. the company must intend to refinance on a long-term basis. (meaning it will not use working capital during the fiscal period)and2. it must demonstrate the ability to consummate the refinancing. (meaning either actually refinancing, or entering into a financing agreement). TERM 5 FICA= DEFINITION 5 7.65% on wages up to $106,800.After that, only tax 1.45% on excess. TERM 6 Compensated absences DEFINITION 6 Vacation/sick pay. Accrue as liability if all of the following exist:1. employee services already rendered2. right accumulate3. payment is probable4. amount can be reasonable estimated. TERM 7 When to record gain contingencies? DEFINITION 7 Never, but can disclose it if a high probability exists for realizing them. TERM 8 When to record loss contingencies? DEFINITION 8 Accrue if it is probable and can be estimated.Disclose if only one of the above i known or reasonably possible.and Do not disclose if remote. TERM 9 How do you account for warranty included in sale of product? DEFINITION 9 Use expense warranty approach:Record sales: Cash Sales Rev.Record warrenty expense: War. Exp Cash War. Liab.*it violated expense recognition principle TERM 10 How do you account for warranty sold separately from product? DEFINITION 10 Sales Warranty Approach:Cash Sales Rev. Unearned War. Rev.Unearned War. Rev. War. Rev.**defers revenue b/c has an obligation over contract life.