BBA2201 Columbia Southern Unit VIII Types of Liabilities Essay Questions Instructions: Principles of AccountingIn this unit, you examine different types of

BBA2201 Columbia Southern Unit VIII Types of Liabilities Essay Questions Instructions: Principles of AccountingIn this unit, you examine different types of liabilities. For this
assignment, compose an essay that answers the following questions: What are three main characteristics of liabilities, and why is it important
to classify liabilities into short-term and long-term? Include examples of
short and long-term liabilities in your response. Your essay must be at least one page in length. Be sure to include an
introduction that gives the purpose of your essay and engages the reader. You
must use at least your textbook as a reference, but you may use other
resources as needed. Any information from a resource must be cited and
referenced in APA style, and your essay should be formatted in accordance with
APA guidelines.Study Guide is attached for review for this assignment. UNIT VIII STUDY GUIDE
Liabilities
Course Learning Outcomes for Unit VIII
Upon completion of this unit, students should be able to:
1. Examine the accounting cycle.
2. Identify business transactions.
3. Generate inventory systems and costing methods.
4. Appraise the classes and transactions of liabilities.
4.1 Describe the three main characteristics of liabilities.
4.2 Explain why it is important to classify liabilities into short and long term.
6. Analyze financial statements to inform decision makers.
8. Compare International Financial Reporting Standards (IFRS) to Generally Accepted Accounting
Principles (GAAP).
Course/Unit
Learning Outcomes
1
2
3
4
4.1
4.2
6
8
Learning Activity
Final Exam
Final Exam
Final Exam
Unit Lesson; Chapter 11; Chapter 14; Final Exam
Unit Lesson; Chapter 11; Chapter 14; Essay
Unit Lesson; Chapter 11; Chapter 14; Essay
Final Exam
Final Exam
Reading Assignment
Chapter 11: Current Liabilities and Payroll
Chapter 14: Long-Term Liabilities
Unit Lesson
Liabilities
In the accounting equation, assets = liabilities + equity, we can see that there are two claims to the assets of
a business—creditors and owners. The accounting equation can also be written as: assets – liabilities =
equity. In this equation, we can see that the liabilities of a business require the use of assets to satisfy the
amount owed.
A liability is an amount owed to lenders, suppliers, or government agencies and requires the use of assets or
future revenues to satisfy the debt. There are two categories of liabilities —current and long term. A current
liability is the amount owed that must be paid within one year or within the company’s operating cycle,
whichever is longer (Miller-Nobles, Mattison, & Matsumura, 2016).
BBA 2201, Principles of Accounting I
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The most common current liability is accounts payable. An account payable isUNIT
an amount
dueGUIDE
a vendor or
x STUDY
supplies for products, supplies or services (Miller-Nobles et al., 2016). Retail businesses
will also have sales
Title
tax payable. Sales tax payable is the amount of sales tax collected by the retailer that must be remitted to the
tax agencies (Miller-Nobles et al., 2016). Because the accounts payable and sales tax payable are due within
one year (generally due within 30 days) they are a current liability.
Some businesses will receive cash payments in advance of providing a service, which is referred to as
unearned revenue (or deferred revenue). Many gyms and fitness centers will have deferred revenue. If you
have ever paid for a year’s membership at the beginning of the year to receive a discount, then you were
involved in a transaction with unearned revenue. The gym does not earn the revenue until they have provided
you with the monthly membership.
For example: If you were to purchase a one year membership for $600, the gym would debit cash for $600
and credit unearned revenue for $600 (a liability). As each month passes, and you do not discontinue your
membership, the gym will record revenue on a monthly basis. Each month the gym will record $50 of revenue
($600 divided by 12 months). The gym will debit unearned revenue and credit revenue for $50.
Long-term liabilities are liabilities that will become due beyond one year or beyond the company’s operating
cycle (Miller-Nobles et al., 2016). A mortgage payable, note payable, or bonds payable are examples of longterm liabilities. Generally, most long-term liabilities have a current portion as well.
For example: Let’s say that a company has a 30-year mortgage on their office building. The mortgage is
$500,000, payments are due monthly with an interest rate of 4.0%. The first year’s amortization is below
in Figure 1.
Figure 1
In this case, the loan was entered into on January 1, 2015 for $500,000. The company would record a current
liability in the amount of $8,057.94 and a long-term liability in the amount of $491,942.06. The current liability
portion is shown as a current liability on the balance sheet and listed as “Current portion of long-term debt.”
Also, notice that with each payment being made, the payment amount remains the same but the allocation
between principal and interest changes with each payment. On this particular amortization, the total payments
of $2,387.08 will be $859,348.80 over the course of 30 years. Of this amount, $500,000 is principal and the
remaining $359,348.80 is interest expense. The final exam contains questions and problems related to the
BBA 2201, Principles of Accounting I
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concepts covered in this unit. If you need extra practice working these problems,
bexsure
to review
the
UNIT
STUDY
GUIDE
examples created by the CSU Math Center in the suggested reading section of
this unit.
Title
Reference
Miller-Nobles, T., Mattison, B., & Matsumura, E. M. (2016). Horngren’s accounting (11th ed.). Boston, MA:
Pearson.
Suggested Reading
The CSU Math Center has created sample problems and examples that will
help you to complete the problems on the unit assessment. For more detailed
explanations or to receive a lesson recorded by the Math Center, please contact
a math specialist at teamsucceed@columbiasouthern.edu or submit a math
center request by clicking here.
Click here to access the Unit VIII example worksheet.
Learning Activities (Nongraded)
Nongraded Learning Activities are provided to aid students in their course of study. You do not have to
submit them. If you have questions, contact your instructor for further guidance and information.
Flash cards
For a review of the Key Terms of the unit, click here to access the interactive Unit VIII Flashcards in
PowerPoint form. (Click here to access a PDF version.)
BBA 2201, Principles of Accounting I
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