Nature of current liabilities, Financial Management

Assignment Help:

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.


Related Discussions:- Nature of current liabilities

Explain about opportunity cost of capital, Explain about opportunity cost o...

Explain about opportunity cost of capital Risk free rate compensates for opportunity lost and risk premium compensates for risk. It can also be known as the 'opportunity cost o

Define defined benefit and defined contribution pension plan, Compare and c...

Compare and contrast a defined benefit and a defined contribution pension plan. In a defined benefit plan, retirement benefits are defined by a formula that generally considers t

What are the types of major types of finance companies, What are the types ...

What are the types of major types of finance companies? There are three main types of finance companies: a. Sales finance institutions which make loans to customers of a cer

Describes the gordons dividend model, Q. Describes the Gordons dividend mod...

Q. Describes the Gordons dividend model? Gordon's Model: - Gordon's model is one more theory which contends that dividend policy is relevant for the value of the firm. Alternat

Estimate the montly deposite, Mr. Moore will be 35 years at the end of the ...

Mr. Moore will be 35 years at the end of the month and he wishes to retire in 25 years. He plans to invest in a mutual fund earning 7.5 percent annual return compounded monthly an

Capiital budgating, calculate payback period of each project and according ...

calculate payback period of each project and according to payback whice project should be accepted

Index amortizing notes (ina), In the Index Amortizing note, the princ...

In the Index Amortizing note, the principal is repaid according to an amortization schedule linked to a specific reference rate. It is structured in such a manner

State about the manufacturing overseas, State about the Manufacturing overs...

State about the Manufacturing overseas or exporting Dyson (appliances manufacturer) relocated UK production to Malaysia in 2002 though still retained its head office within the

Beta, what is the value of beta for this fund ? If the benchmark index for ...

what is the value of beta for this fund ? If the benchmark index for this mutual fund increased by 11.00% during the period covered by beta measure, what was the rate of return for

What is the basic approach of the financial management, Q. What is the basi...

Q. What is the basic Approach of the financial management ? 1) The first approach view finance as to providing the funds needed by a business on the most suitable terms. This ap

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd