{"id":3817,"date":"2020-10-22T20:50:00","date_gmt":"2020-10-22T20:50:00","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-financialaccounting\/?post_type=chapter&#038;p=3817"},"modified":"2020-12-03T23:13:10","modified_gmt":"2020-12-03T23:13:10","slug":"introduction-to-other-current-liabilities","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/chapter\/introduction-to-other-current-liabilities\/","title":{"raw":"Introduction to Other Current Liabilities","rendered":"Introduction to Other Current Liabilities"},"content":{"raw":"<h2>What you will learn to do: Identify other current liabilities<\/h2>\r\nSo far in this module, we\u2019ve covered trade accounts payable and payroll, as well as a few smaller items such as income taxes and sales taxes payable. Although there are many potential categories of current liabilities, most of them follow the same rules and concepts as the ones you\u2019ve seen so far and fall into one of the two major categories:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Accrued expenses<\/li>\r\n \t<li style=\"font-weight: 400;\">Deferred revenues<\/li>\r\n<\/ul>\r\nIn this section, we\u2019ll focus on a few more kinds of current liabilities that involve estimation and some extra judgment.\r\n\r\nLet\u2019s take a look at the <a href=\"https:\/\/www.dropbox.com\/s\/5t3bfc0qw2ngpi6\/Screen%20Shot%202020-11-18%20at%203.47.47%20PM.png?dl=0\" target=\"_blank\" rel=\"noopener\">consolidated balance sheet for Macy\u2019s, Inc.<\/a> as of February 1, 2020:\r\n\r\n[caption id=\"attachment_6387\" align=\"aligncenter\" width=\"1024\"]<img class=\"wp-image-6387 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/18234812\/Screen-Shot-2020-11-18-at-3.47.47-PM-1024x854.png\" alt=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Macys+CBS.txt\" width=\"1024\" height=\"854\" \/> See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/BryanWholesaleCoInvoiceNo1258.txt\" target=\"_blank\" rel=\"noopener\">balance sheet long description<\/a> here.[\/caption]\r\n\r\nCurrent assets were $6.810 billion and current liabilities were $5.750 billion. Of the current liabilities, short-term debt and trade (merchandise) accounts payable are predictably at the top of the list. For a breakdown of the other accounts payable and accrued liabilities in the amount of 3.448 billion, we would explore the notes, and find this:\r\n\r\n[caption id=\"attachment_6388\" align=\"aligncenter\" width=\"1024\"]<img class=\"wp-image-6388 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/18234914\/Screen-Shot-2020-11-18-at-3.49.03-PM-1024x573.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"573\" \/> See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Macys+Note+7.txt\" target=\"_blank\" rel=\"noopener\">note long description<\/a> here.[\/caption]\r\n\r\nWe see some accounts payable that are separate from the merchandise accounts payable, probably utilities, rent, and other non-inventory payables. We also see a deferred\/unearned revenue account for gift card balances outstanding. Next is a line item for short-term and current lease obligations, followed by an allowance for future sales returns.\r\n\r\nIn an earlier section, you studied briefly, accrued wages. Notice that the company has also accrued vacation pay that has been earned by the employee and therefore incurred by the company, but that will be paid out in the future, as well as an accrual for retirees\u2019 health and pension payments that are currently due.\r\n\r\nRecall that FASB\u2019s Concept Statement No. 6 defines liabilities as \u201cprobable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.\u201d\r\n\r\nAlso recall that current liabilities are obligations that (1) are payable within one year or one operating cycle, whichever is longer, or (2) will be paid out of current assets or create other current liabilities.\r\n\r\nTherefore, when preparing financial statements or auditing a company\u2019s books, accountants must actively seek out any financial obligations that the company has committed to. You\u2019ve seen this in action with things like gift cards and salaries and wages earned, as well as income tax due and of course trade accounts payable.\r\n\r\nOther current liabilities include the income taxes due, interest due on loans, and some other liabilities that are less common, such as current obligations that arose from some restructuring and some gains on the sale of real estate in the prior year that were not recognized until the current year.\r\n\r\nSome other common current liabilities include product warranties and contingent liabilities, such as pending lawsuits. These both require some estimating and judgment, as you\u2019ll see on the following pages.","rendered":"<h2>What you will learn to do: Identify other current liabilities<\/h2>\n<p>So far in this module, we\u2019ve covered trade accounts payable and payroll, as well as a few smaller items such as income taxes and sales taxes payable. Although there are many potential categories of current liabilities, most of them follow the same rules and concepts as the ones you\u2019ve seen so far and fall into one of the two major categories:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Accrued expenses<\/li>\n<li style=\"font-weight: 400;\">Deferred revenues<\/li>\n<\/ul>\n<p>In this section, we\u2019ll focus on a few more kinds of current liabilities that involve estimation and some extra judgment.<\/p>\n<p>Let\u2019s take a look at the <a href=\"https:\/\/www.dropbox.com\/s\/5t3bfc0qw2ngpi6\/Screen%20Shot%202020-11-18%20at%203.47.47%20PM.png?dl=0\" target=\"_blank\" rel=\"noopener\">consolidated balance sheet for Macy\u2019s, Inc.<\/a> as of February 1, 2020:<\/p>\n<div id=\"attachment_6387\" style=\"width: 1034px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-6387\" class=\"wp-image-6387 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/18234812\/Screen-Shot-2020-11-18-at-3.47.47-PM-1024x854.png\" alt=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Macys+CBS.txt\" width=\"1024\" height=\"854\" \/><\/p>\n<p id=\"caption-attachment-6387\" class=\"wp-caption-text\">See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/BryanWholesaleCoInvoiceNo1258.txt\" target=\"_blank\" rel=\"noopener\">balance sheet long description<\/a> here.<\/p>\n<\/div>\n<p>Current assets were $6.810 billion and current liabilities were $5.750 billion. Of the current liabilities, short-term debt and trade (merchandise) accounts payable are predictably at the top of the list. For a breakdown of the other accounts payable and accrued liabilities in the amount of 3.448 billion, we would explore the notes, and find this:<\/p>\n<div id=\"attachment_6388\" style=\"width: 1034px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-6388\" class=\"wp-image-6388 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/18234914\/Screen-Shot-2020-11-18-at-3.49.03-PM-1024x573.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"573\" \/><\/p>\n<p id=\"caption-attachment-6388\" class=\"wp-caption-text\">See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Macys+Note+7.txt\" target=\"_blank\" rel=\"noopener\">note long description<\/a> here.<\/p>\n<\/div>\n<p>We see some accounts payable that are separate from the merchandise accounts payable, probably utilities, rent, and other non-inventory payables. We also see a deferred\/unearned revenue account for gift card balances outstanding. Next is a line item for short-term and current lease obligations, followed by an allowance for future sales returns.<\/p>\n<p>In an earlier section, you studied briefly, accrued wages. Notice that the company has also accrued vacation pay that has been earned by the employee and therefore incurred by the company, but that will be paid out in the future, as well as an accrual for retirees\u2019 health and pension payments that are currently due.<\/p>\n<p>Recall that FASB\u2019s Concept Statement No. 6 defines liabilities as \u201cprobable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.\u201d<\/p>\n<p>Also recall that current liabilities are obligations that (1) are payable within one year or one operating cycle, whichever is longer, or (2) will be paid out of current assets or create other current liabilities.<\/p>\n<p>Therefore, when preparing financial statements or auditing a company\u2019s books, accountants must actively seek out any financial obligations that the company has committed to. You\u2019ve seen this in action with things like gift cards and salaries and wages earned, as well as income tax due and of course trade accounts payable.<\/p>\n<p>Other current liabilities include the income taxes due, interest due on loans, and some other liabilities that are less common, such as current obligations that arose from some restructuring and some gains on the sale of real estate in the prior year that were not recognized until the current year.<\/p>\n<p>Some other common current liabilities include product warranties and contingent liabilities, such as pending lawsuits. These both require some estimating and judgment, as you\u2019ll see on the following pages.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3817\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Introduction to Other Current Liabilities. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":90270,"menu_order":12,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Introduction to Other Current Liabilities\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-3817","chapter","type-chapter","status-publish","hentry"],"part":837,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/users\/90270"}],"version-history":[{"count":4,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3817\/revisions"}],"predecessor-version":[{"id":6681,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3817\/revisions\/6681"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/parts\/837"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3817\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/media?parent=3817"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=3817"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/contributor?post=3817"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/license?post=3817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}