Short term financing (due in less than one year) obtained from banks and other creditors.
Notes due in greater than 12 months are considered a non-current liability.
Accounts payable - correct answer Current liability
Short-term obligation of a company to pay its suppliers for goods/services provided on credit.
Also known as trade payables or trade creditors.
Accrued Expenses - correct answer Current liability
Those expenses recognized on the income statement before they are paid in cash. Insurance, rent, and
salary expenses are typical accrued expenses.
Current portion of Long-term Debt - correct answer Current liability
The principle portion of long-term debt that must be paid within the next year.
Long term debt - correct answer Noncurrent liability
Generally used to finance the purchase of long-lived assets, such as property plant, and equipment.
Long-term capital leases, debentures, and bonds issued by the company, also fall into this category of
debt.
Unearned Revenue - correct answer A liability that reports amounts received in
advance for providing goods or services.
, When the goods or services are provided, this account balance is decreased and a revenue account is
increased.
Is categorized as a current liability on the balance sheet if the performance will happen within the next
12 months. Anything expected to take place more than 12 months after the balance sheet date is
reflected as a long-term liability.
Senior note - correct answer A loan is said to be senior to another when it has a
higher priority of repayment in the even that the company has liquidated.
A secured note is senior to an unsecured note.
Two unsecured notes are equal in priority.
An unsecured note and accounts payable are also equal.
Deposits - correct answer Payments that customers make to a company to
guarantee:
Companies performance on a contract
Customer's payment on a contract (example rent)
Customer's payment for possible damage to property
The company usually credits/returns these deposits when the contract is completed.
Deposits are categorized as: (2) - correct answer 1) An asset called deposits, since
the money should be segregated from normal cash balances
2) A liability-also called deposits-since there is an obligation to return the deposit once the performance
is completed.
Once the deposit is returned to the customer, both the asset and liability decrease.
Noncurrent liabilities - correct answer Company obligations that extend beyond the
12 months following the financial statement date.
Examples: Loans from banks, leases, company-issued debentures, mortgages, and deferred taxes.
Term Loans - correct answer Are the form of long-term debt most frequently used
by businesses. In most cases, a term loan is a bank loan to finance a company's fixed assets.
Has a fixed maturity date, generally 5-7 years from the date of the loan. Usually secured.
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