Week 5 Long Lived Assets and Liabilities and Time Value of Money Discussion Accounting for Liabilities graded In this area we will discuss different types of liabilities and understand how to account for and report those liabilities Why are liabilities classified on a balance sheet as current and non current Who wants to know What is the benefit of knowing this information Responses Responses are listed below in the following order response author and the date and time the response is posted Response Date Time Author W el co m e to w ee k 5 th re a de d di sc us si o ns Professor Wilson 3 10 2013 11 10 08 AM As we start the discussions for week 5 please consider the following In this area we will discuss different types of liabilities and understand how to account for and report those liabilities Why are liabilities classified on a balance sheet as current and non current Who wants to know What is the benefit of knowing this information Class Prof Wilson Geri Waldbillig 3 31 2013 2 28 21 PM R E W el c o m e to w ee k 5 th re a d e d di sc u ss io n s Current liabilities are those that are due in 12 months or less Non current liabilities are due after 12 months Investors are interested in knowing the current and non current liabilities as it help paint a picture of where the company stands as far as debt owed to other entities Zach Monroe 3 31 2013 5 56 21 PM RE Welcome to week 5 threaded discussions One of my classmates has already mentioned that the difference between current liabilities and non current is that the current liabilities expect to be settled within twelve months and the non current liabilities don t expect to be liquid within twelve months As far as the benefit for the company itself I would say that knowing how liabilities are classified actually makes it possible to calculate ratios for financial analysis like liquidity solvency and profitability R E W el c o m e t o w e e k 5 t h r e a d e d d is c u ss io n s Joshua Roque 4 3 2013 6 47 52 PM Current liabilities indicate that an organization or company will be receiving a payment of some sort within a specific duration of time typically within 1 year This will be indicated on the balance sheet then as a current liability Non Current liabilities are ones that are going beyond the 12 month mark and a organization is not expecting any sort of payment within the 12 month mark These then will be indicated within the balance sheet as non current liabilities The reason it is important is because companies can then properly settle their books within the accounts payable receivable and are able to properly determine their current standing By expecting payments for a specific liability within the 12 mark it is able to be logged within the balance sheet and thus able to determine actual profitability within the organization If these were not indicated within a balance sheet it might be assumed that everything from a building to a piece of equipment will have some sort of settlement and this can cause disarray and fudge the numbers showing false information If an audit or some sort of analysis were to occur in a period the information would not be accurate rather false Rachid Khalfaoui 3 31 2013 6 02 59 PM RE Welcome to week 5 threaded discussions Pr Wilson and class In accounting current liabilities are liabilities that are to be paid in cash within the fiscal year They are obligations that will be settled by current assets or by new current liabilities For example accounts payable for goods or services payable within a normal period would be current liabilities Bonds and mortgages that are payable over a term exceeding one year would be fixed liabilities or long term liabilities However the payments due on loans in the current fiscal year could be considered current liabilities Amounts due to lenders show up under the heading of other current liabilities if they are paid during the fiscal year The proper classification of liabilities is essential for allowing outsiders to consider a true picture of an organization s fiscal health Rachid David Neville R E W 4 1 2013 7 52 52 AM el c o m e to w ee k 5 th re a d e d di sc u ss io n s Knowing the liabilities of a company helps investors evaluate the company s worth and is required by the SEC Vi Nguyen 4 1 2013 10 48 02 AM RE Welcome to week 5 threaded discussions Current liabilities are notes that needs to be paid with 12 months of the borrowing These include account payable and any short term notes Non current liabilities are things that the company does not have to pay on immediately Hence the word non current Examples of non current liabilities can be bond notes and building lease These are not expected to be paid off within 12 months 4 1 2013 12 50 48 PM Jessica Dallek R E W el c o m e to w ee k 5 th re a d e d di sc u ss io n s Liabilities are divided as current and long term because of the length of time the company expects to pay off the debt Anything that will be paid using current assets or within a one year period is considered current and anything longer than that is considered long term Internal and External Users would benefit from this information because how many and which type of liabilities can determine whether a company has the ability to pay off debt If they have a lot of short term debt will they be able to pay using their cash on hand Do they have enough cash on hand to cover current liabilities Mangers and creditors would be interested in this information This not only includes debt but if they are able to pay their income taxes salaries etc Investors would want to make sure that this company will not go under so they want to analyze the ratio between assets and liabilities Professor Wilson 4 1 2013 1 04 18 PM R E W el c o m e t o w e e k 5 t h r e a d e d d is c u ss io n s R E W el c o m e t o w e e k 5 t h Jessica Vi et al and rest of the class Good job on explaing the difference between current and non current liabilities What happens if a current liability is misclassified in the balance sheet as long term liability and vice versa Prof Wilson Vi Nguyen 4 2 2013 11 14 19 AM r e a d e d d is c u ss io n s R E W el c o …