FABM1 Lesson8-1 Five Major Accounts-LIABILITIES

FIVE MAJ O R AC C OU N TS
LIAB IL IT IE S NT 1
USINESS AND M AN AGEM E
LS O F AC C OUNTIN G, B
FUNDAMENTA
PREPARED BY: SLVM
o ns re so urces.blogspot .com/
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LIABILITIES
•CURRENT - Mounts due to be paid to creditors within

twelve months.
•NON-CURRENT - are long term liabilities or obligations
which are payable for a period longer than one year.
http://onlinelessonsresources.blogspot.com/
Classification of
Current Liabilities
International Accounting Standards 1 (December 2003) classify liability

as a current liability when:
1. it is expected to be settled in the entity’s normal operating cycle;
2. it is held primarily for the purpose of being traded;
3. it is due to be settled within twelve months after the balance sheet
date; or
4. The entity does not have an unconditional right to defer settlement
of the liability for at least twelve months after the balance sheet
date.
Trade and Other Payables
– 1. Accounts payable includes debts arising

from the purchase of an asset or the acquisition of
services on account.
– 2. Notes payable includes debts arising from the
purchase of an asset or the acquisition of services on
account evidenced by a promissory note.
– 3. Loan Payable is a liability to pay the bank or other financing

institution arising from funds borrowed by the business from these
institutions payable within twelve months or shorter.
(Note: If the loan is payable beyond twelve months, then it is classified
under non-current liabilities.)
– 4. Utilities payable is an obligation to pay utility companies for
services received from them. Examples of this are telephone services to
PLDT, electricity to Meralco, and water services to Lupata
– 5. Unearned revenues represent obligations of the business

arising from advance payments received before goods or services
are provided to the customer. This will be settled when certain
goods or services are delivered or rendered.
– 6. Accrued liabilities include amounts owed to others for
expenses already incurred but are not yet paid. Examples of these
are salaries payable, utilities payable, taxes payable, and interest
payable. http://onlinelessonsresources.blogspot.com/
Classification of Non-Current
Liabilities
– 1. Mortgage payable is a long-term debt of the

business with security or collateral in the form of real
properties.
– 2. Bonds payable is a certificate of indebtedness
under the seal of a corporation, specifying the terms of
repayment and the rate of interest to be charged.
DRILL
– Give examples of Liabilities

– Current and Non Current
Assessment:
1. Certificate of indebtedness under the seat of a corporation.

2. Debts arising from the acquisition of services on account.
3. Liability arising from amount of money borrowed by the business either from a bank or from
any financial institution.
4. Longterm debt of the business with security or collateral in the form of real properties
5. Debts arising from purchase of an asset on account evidenced by a promissory note.
6. An obligation to pay utility companies for services received from them.
7. Obligations of the business arising from advance payments received before services are
provided to the customer
8. Amounts owed to others for expenses already incurred but not yet paid
Assessment:
1. Certificate of indebtedness under the seat of a corporation. (Bonds Payable)

2. Debts arising from the acquisition of services on account. (Accounts Payable)
3. Liability arising from amount of money borrowed by the business either from a bank or from any
financial institution. (loans Payable)
4. Longterm debt of the business with security or collateral in the form of real properties (Mortgage)
5. Debts arising from purchase of an asset on account evidenced by a promissory note. (Note payable)
6. An obligation to pay utility companies for services received from them. (Utilities Payable)
7. Obligations of the business arising from advance payments received before services are provided to
the customer (Unearned liability)
8. Amounts owed to others for expenses already incurred but not yet paid (Accrued Liability)
QUIZ
Identify what liability account will be affected:

1. Purchase of supplies on account.
2. Advance Payment for rent.
3. Rendered service on account but not yet paid by the customer.
4. Received an advance payment from the customer for the delivery truck
repair.
5. The company borrowed P100,000 from BDO with a promise to pay
within a year
QUIZ: ANSWER
Identify what liability account will be affected:

1. Purchase of supplies on account. (Accounts Payable)
2. Advance Payment for rent of the client. (Unearned Revenue)
3. Rendered service on account but not yet paid by the customer. (Accounts
Recievable)
4. Received an advance payment from the customer for the delivery truck repair.
(Unearned Revenue)
5. The company borrowed P100,000 from BDO with a promise to pay within a year.
(Notes Payable)
Reference:
– Fundamentals of Accountancy, Business and Management 1, 2016

By: Flocer Lao Ong

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FIVE MAJ O R AC C OU N TS

•CURRENT - Mounts due to be paid to creditors within

International Accounting Standards 1 (December 2003) classify liability

– 1. Accounts payable includes debts arising

– 3. Loan Payable is a liability to pay the bank or other financing

– 5. Unearned revenues represent obligations of the business

– 1. Mortgage payable is a long-term debt of the

– Give examples of Liabilities

1. Certificate of indebtedness under the seat of a corporation.

1. Certificate of indebtedness under the seat of a corporation. (Bonds Payable)

Identify what liability account will be affected:

Identify what liability account will be affected:

– Fundamentals of Accountancy, Business and Management 1, 2016

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