Accounts: Liabilities and Depreciation Methods
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This document provides information on various topics related to accounts, including journal entries, bank reconciliation, inventory costing, and depreciation methods. It covers topics such as liabilities and their elements, calculation of bad debts, and the selection of appropriate depreciation methods. The document also includes examples and explanations to help understand the concepts better.
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Table of Contents
TASK 1............................................................................................................................................3
QUESTION 1...................................................................................................................................3
Q1: Journal of Jim's Cleaning Services for the month of July....................................................3
QUESTION 2...................................................................................................................................3
A) Bank reconciliation statement for M&N Windows Ltd. at June 30, 2019:...........................3
(b) Reconciliation statement.......................................................................................................4
QUESTION 3...................................................................................................................................4
a) Journal entries by using net credit sales & ageing of account receivable...............................4
c) Calculation of amount of bed debts........................................................................................7
d) Reason of calculation difference between credit sales method and account receivable
method.........................................................................................................................................7
QUESTION 4...................................................................................................................................7
a) Determine the Ending inventory and Cost of Sales for the month of June, using the FIFO
costing method............................................................................................................................7
(b) Income statement of XY Ltd for the year ended 30 June 2019.............................................9
c) Perpetual Inventory system...................................................................................................10
QUESTION 5.................................................................................................................................10
Calculation of value of assets by using straight line and diminish rate method of depreciation.
...................................................................................................................................................10
Straight line method..................................................................................................................11
c) Value of heavier bass beat....................................................................................................12
d) Factors which consider in selecting appropriate method of depreciation.............................13
Q6: Liabilities and its elements:................................................................................................13
REFERENCES..............................................................................................................................16
TASK 1............................................................................................................................................3
QUESTION 1...................................................................................................................................3
Q1: Journal of Jim's Cleaning Services for the month of July....................................................3
QUESTION 2...................................................................................................................................3
A) Bank reconciliation statement for M&N Windows Ltd. at June 30, 2019:...........................3
(b) Reconciliation statement.......................................................................................................4
QUESTION 3...................................................................................................................................4
a) Journal entries by using net credit sales & ageing of account receivable...............................4
c) Calculation of amount of bed debts........................................................................................7
d) Reason of calculation difference between credit sales method and account receivable
method.........................................................................................................................................7
QUESTION 4...................................................................................................................................7
a) Determine the Ending inventory and Cost of Sales for the month of June, using the FIFO
costing method............................................................................................................................7
(b) Income statement of XY Ltd for the year ended 30 June 2019.............................................9
c) Perpetual Inventory system...................................................................................................10
QUESTION 5.................................................................................................................................10
Calculation of value of assets by using straight line and diminish rate method of depreciation.
...................................................................................................................................................10
Straight line method..................................................................................................................11
c) Value of heavier bass beat....................................................................................................12
d) Factors which consider in selecting appropriate method of depreciation.............................13
Q6: Liabilities and its elements:................................................................................................13
REFERENCES..............................................................................................................................16
TASK 1
QUESTION 1
Q1: Journal of Jim's Cleaning Services for the month of July
(a)
Date Particulars Debit Credit
01/07/20 Rent a/c Dr. 3600
To Cash a/c 3600
01/07/20 Insurance Policy a/c Dr. 1560
To Cash a/c 1560
10/07/20 Cash a/c Dr. 2800
To Unearned Revenues 2800
15/07/20 Purchases a/c Dr. 2340
To Cash a/c 2340
28/07/20 Salaries a/c Dr. 6080
To Cash a/c 5320
To Outstanding salaries 760
(b)
31/07/20 Unearned Revenues a/c Dr. 840
To Sales 840
QUESTION 2
A) Bank reconciliation statement for M&N Windows Ltd. at June 30, 2019:
Particulars Amount
Credit Balance as per bank statement 101160
Add: Deposit in transit 12540
QUESTION 1
Q1: Journal of Jim's Cleaning Services for the month of July
(a)
Date Particulars Debit Credit
01/07/20 Rent a/c Dr. 3600
To Cash a/c 3600
01/07/20 Insurance Policy a/c Dr. 1560
To Cash a/c 1560
10/07/20 Cash a/c Dr. 2800
To Unearned Revenues 2800
15/07/20 Purchases a/c Dr. 2340
To Cash a/c 2340
28/07/20 Salaries a/c Dr. 6080
To Cash a/c 5320
To Outstanding salaries 760
(b)
31/07/20 Unearned Revenues a/c Dr. 840
To Sales 840
QUESTION 2
A) Bank reconciliation statement for M&N Windows Ltd. at June 30, 2019:
Particulars Amount
Credit Balance as per bank statement 101160
Add: Deposit in transit 12540
Less: Interest earned on bank account -75
Add: Cheque recorded above value 540
Less: Unrepresented cheques -37407
Less: Service charges included in bank statement -150
Less: Electronic transfer from customer -3864
Add: Dishonoured cheque 3900
Less: Suspense -780
Debit Balance as per cash book 75864
(b) Reconciliation statement
A bank reconciliation statement refers to a summary of business and banking transactions
which reconciles an organisation's financial records with its bank account transactions and
amount. The statement focuses on the banking activities of the business like withdrawals,
deposits and other transactions which affect the bank account of the organisation or individual.
Bank reconciliation is still necessary even when most of the transactions take place using
electronic transfer of funds because it helps the business to establish effective financial internal
control to prevent frauds and errors. The reconciliation further helps and identify the difference
between bank balance and financial records (de Menezes Neto and Aguiar, 2019).
QUESTION 3
a) Journal entries by using net credit sales & ageing of account receivable.
Journal entries of
InvisiGuard Ltd
InvisiGuard Ltd
Debtors a/c 210000
Add: Cheque recorded above value 540
Less: Unrepresented cheques -37407
Less: Service charges included in bank statement -150
Less: Electronic transfer from customer -3864
Add: Dishonoured cheque 3900
Less: Suspense -780
Debit Balance as per cash book 75864
(b) Reconciliation statement
A bank reconciliation statement refers to a summary of business and banking transactions
which reconciles an organisation's financial records with its bank account transactions and
amount. The statement focuses on the banking activities of the business like withdrawals,
deposits and other transactions which affect the bank account of the organisation or individual.
Bank reconciliation is still necessary even when most of the transactions take place using
electronic transfer of funds because it helps the business to establish effective financial internal
control to prevent frauds and errors. The reconciliation further helps and identify the difference
between bank balance and financial records (de Menezes Neto and Aguiar, 2019).
QUESTION 3
a) Journal entries by using net credit sales & ageing of account receivable.
Journal entries of
InvisiGuard Ltd
InvisiGuard Ltd
Debtors a/c 210000
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Journal entries of
InvisiGuard Ltd
InvisiGuard Ltd
To sales 210000
Cash 20000
To sales 20000
Sales return 80000
To debtors 80000
Bed debts 5250
To debtors 5250
Credit sales 210000
Cash sales 20000
Total sales 230000
Bed debts expenses = 0
Account receivables 593000
Credit sales 210000
Ending balance 803000
Assets
Cash 21000000
Account receivables 593000
InvisiGuard Ltd
InvisiGuard Ltd
To sales 210000
Cash 20000
To sales 20000
Sales return 80000
To debtors 80000
Bed debts 5250
To debtors 5250
Credit sales 210000
Cash sales 20000
Total sales 230000
Bed debts expenses = 0
Account receivables 593000
Credit sales 210000
Ending balance 803000
Assets
Cash 21000000
Account receivables 593000
Assets
- Allowance for doubtful debtors 2800
Particular Days Balance 7 of estimated
uncollected
Account not paid 351200 3512
Account overdue 10-30 days 92000 2760
31 -60 78000 7800
61-120 40800 12240
121 to days over 31000 18600
Total value of
estimated bed debts
44912
Bed debts 2800
To Allowance to bed debts 2800
Bed debt expenses 44912
To account receivables 44912
b) Ledger
Ledger (Debtor)
Date Particular L.F Amount Date Particular L.F Amount
To sales
a/c
210000 By bad
debts
5250
By 204750
- Allowance for doubtful debtors 2800
Particular Days Balance 7 of estimated
uncollected
Account not paid 351200 3512
Account overdue 10-30 days 92000 2760
31 -60 78000 7800
61-120 40800 12240
121 to days over 31000 18600
Total value of
estimated bed debts
44912
Bed debts 2800
To Allowance to bed debts 2800
Bed debt expenses 44912
To account receivables 44912
b) Ledger
Ledger (Debtor)
Date Particular L.F Amount Date Particular L.F Amount
To sales
a/c
210000 By bad
debts
5250
By 204750
Ledger (Debtor)
balance
c/d
Sales
Date Particular L.F Amount Date Particular L.F Amount
By Cash 20000
By debtors 210000
Cash
Date Particular L.F ad debts Date Particular L.F Amount
To sales
a/c
20000 By
balance
c/d
20000
Bad debts
Date Particular L.F Amount Date Particular L.F Amount
To
allowance
to bed
debts
2800 By
balance
c/d
52962
To
account
44912
balance
c/d
Sales
Date Particular L.F Amount Date Particular L.F Amount
By Cash 20000
By debtors 210000
Cash
Date Particular L.F ad debts Date Particular L.F Amount
To sales
a/c
20000 By
balance
c/d
20000
Bad debts
Date Particular L.F Amount Date Particular L.F Amount
To
allowance
to bed
debts
2800 By
balance
c/d
52962
To
account
44912
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Bad debts
receivable
s
To debtor 5250
52962 52962
Account
receivable
s
Date Particular L.F Amount Date Particular L.F Amount
To balance
b/d
593000 By
allowance
to debtor
2800
By bed
debts
expense
44912
By
balance
c/d
545288
c) Calculation of amount of bed debts.
Bed debts = 980
Account receivables 593000 – Allowances value = 44192+2800 = 545028
d) Reason of calculation difference between credit sales method and account receivable method.
When manager choose to adopt credit sale method for the purpose of valuation of bed
debt amount in that case value of bed debts is estimated on the % of sales which is not
universally accepted and reliable to determine accurate result. On the other side in account
receivable method , it is based on balance sheet method in which account receivables and bed
receivable
s
To debtor 5250
52962 52962
Account
receivable
s
Date Particular L.F Amount Date Particular L.F Amount
To balance
b/d
593000 By
allowance
to debtor
2800
By bed
debts
expense
44912
By
balance
c/d
545288
c) Calculation of amount of bed debts.
Bed debts = 980
Account receivables 593000 – Allowances value = 44192+2800 = 545028
d) Reason of calculation difference between credit sales method and account receivable method.
When manager choose to adopt credit sale method for the purpose of valuation of bed
debt amount in that case value of bed debts is estimated on the % of sales which is not
universally accepted and reliable to determine accurate result. On the other side in account
receivable method , it is based on balance sheet method in which account receivables and bed
debts are consider and assumed to be uncollected. Thus both methods showcase different balance
of bed debts (Kuter, Gurskaya, Andreenkova and Bagdasaryan, 2018).
QUESTION 4
a) Determine the Ending inventory and Cost of Sales for the month of June, using the FIFO
costing method.
Units
Beginning inventory 1,050.00
Total Purchases 1,950.00 (750+450+750)
Less: Ending Inventory - 975.00
No. of units sold 2,025.00
FIFO- Ending Inventory
Units Unit Cost Total Cost
June 23 Purchase 750.00 21.00 15,750.00
June 15 Purchase 225.00 19.80 4,455.00
Total ending inventory 975.00 20,205.00
FIFO- Cost of Goods
Sold
Units Unit Cost Total Cost
Beginning Inventory 1,050.00 18.00 18,900.00
June 10 Purchase 750.00 18.90 14,175.00
June 15 Purchase 225.00 19.80 4,455.00
Total COGS 2,025.00 37,530.00
InvisiGuard Ltd sells security doors. Majority of its sales are on credit except small amount of
cash (Malitskaya, Chirkova, Shirobokov and Volkova, 2019).
sales each year. The accounting records at 30 June 2019 reveal the following. Ignore GST
of bed debts (Kuter, Gurskaya, Andreenkova and Bagdasaryan, 2018).
QUESTION 4
a) Determine the Ending inventory and Cost of Sales for the month of June, using the FIFO
costing method.
Units
Beginning inventory 1,050.00
Total Purchases 1,950.00 (750+450+750)
Less: Ending Inventory - 975.00
No. of units sold 2,025.00
FIFO- Ending Inventory
Units Unit Cost Total Cost
June 23 Purchase 750.00 21.00 15,750.00
June 15 Purchase 225.00 19.80 4,455.00
Total ending inventory 975.00 20,205.00
FIFO- Cost of Goods
Sold
Units Unit Cost Total Cost
Beginning Inventory 1,050.00 18.00 18,900.00
June 10 Purchase 750.00 18.90 14,175.00
June 15 Purchase 225.00 19.80 4,455.00
Total COGS 2,025.00 37,530.00
InvisiGuard Ltd sells security doors. Majority of its sales are on credit except small amount of
cash (Malitskaya, Chirkova, Shirobokov and Volkova, 2019).
sales each year. The accounting records at 30 June 2019 reveal the following. Ignore GST
(b) Income statement of XY Ltd for the year ended 30 June 2019
Particulars Amount
Sales (50*2025) $101250
Less: Cost of goods sold $37530
Gross profit $63720
Particulars Amount
Sales (50*2025) $101250
Less: Cost of goods sold $37530
Gross profit $63720
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c) Perpetual Inventory system
It is a system which is used for the purpose of management of inventory. XY Ltd’s needs
to implement this system for following reason:
This system is useful in record transaction at the time when they are accrued, or
manager purchase or sale any kind of goods for their organization.
Chance of error are nil as effective computerised system and software is use for recording of
transaction (Nasritdinov and Berdiyorov, 2020).
This system is useful in managing inventory in such a manner which beneficial in
proving accurate and reliable business data as well as control cost for managing stock.
QUESTION 5
Calculation of value of assets by using straight line and diminish rate method of depreciation.
Depreciation
account
Date Particular Amount Date Particular Amount
01/03/19 To Sound
system
406.25 31/03/19 By balance b/d 406.25
01/04/19 To balance b/d 406.25 30/04/19 By balance c/d 812.25
30/04/19 To Sound
system
406.25
812.25
01/05/19 To balance b/d 812.25 31/05/19 By balance c/d 1218.5
31/05/19 To Sound 406.25
It is a system which is used for the purpose of management of inventory. XY Ltd’s needs
to implement this system for following reason:
This system is useful in record transaction at the time when they are accrued, or
manager purchase or sale any kind of goods for their organization.
Chance of error are nil as effective computerised system and software is use for recording of
transaction (Nasritdinov and Berdiyorov, 2020).
This system is useful in managing inventory in such a manner which beneficial in
proving accurate and reliable business data as well as control cost for managing stock.
QUESTION 5
Calculation of value of assets by using straight line and diminish rate method of depreciation.
Depreciation
account
Date Particular Amount Date Particular Amount
01/03/19 To Sound
system
406.25 31/03/19 By balance b/d 406.25
01/04/19 To balance b/d 406.25 30/04/19 By balance c/d 812.25
30/04/19 To Sound
system
406.25
812.25
01/05/19 To balance b/d 812.25 31/05/19 By balance c/d 1218.5
31/05/19 To Sound 406.25
Depreciation
account
system
01/06/19 To balance b/d 1218.5 30/06/19 By balance c/d 1625
To Sound
system
406.25
Calculation of assets' value
( Sound system)
Month To lightning system Value of assets
38593.75 406.25 39000 – 406.25 = 38593.25
April 406.25 38187
May 406.25 37780.25
To lightning system 406.25 37537
Sound system
Month Diminishing rate Amount Value of assets
March 12.50% 406.25 39000-406.25 =38594
April 12.50% 402 38190
May 12.50% 398 37792
June 12.50% 393 37400
account
system
01/06/19 To balance b/d 1218.5 30/06/19 By balance c/d 1625
To Sound
system
406.25
Calculation of assets' value
( Sound system)
Month To lightning system Value of assets
38593.75 406.25 39000 – 406.25 = 38593.25
April 406.25 38187
May 406.25 37780.25
To lightning system 406.25 37537
Sound system
Month Diminishing rate Amount Value of assets
March 12.50% 406.25 39000-406.25 =38594
April 12.50% 402 38190
May 12.50% 398 37792
June 12.50% 393 37400
Straight line method
Depreciation
account
Date Particular Amount Date Particular Amount
01/03/19 To lightning
system
916.77 31/03/19 By balance c/d 916.77
01/04/19 To balance b/d 916.77
To lightning
system
916.77 30/04/19 By balance c/d 1833
01/05/19 To balance b/d 1833 By balance c/d 2750
30/05/19 To lightning
system
916.77
01/06/19 To balance b/d 2750 By balance c/d 3667
30/06/19 To lightning
system
916.77
Month March 916.7
March April 916.7
April May 916.7
May June 916.7
June 916.7 51333
Depreciation
account
Date Particular Amount Date Particular Amount
01/03/19 To lightning
system
916.77 31/03/19 By balance c/d 916.77
01/04/19 To balance b/d 916.77
To lightning
system
916.77 30/04/19 By balance c/d 1833
01/05/19 To balance b/d 1833 By balance c/d 2750
30/05/19 To lightning
system
916.77
01/06/19 To balance b/d 2750 By balance c/d 3667
30/06/19 To lightning
system
916.77
Month March 916.7
March April 916.7
April May 916.7
May June 916.7
June 916.7 51333
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Diminishing method of depreciation
March 55000 % 5 % Lighting system Value of assets
March 230 55000-230 = 54770
April 228 54770 – 228 = 54540
May 227 54313
June 226 54087
By calculating depreciation of both it has been recognized that diminishing method is more
beneficial as value f asst is much higher as compare to straight line method of depreciation (Peng
and Zhou, 2019).
c) Value of heavier bass beat.
Cost incurred on fixing heavier bass beat in sound system, this item is treated as expenses
as it increase value of assets , it includes as revenue generating expense thus it is showcase in
income statement in expense side and it also impact on their balance sheet as value of sound
system has been increase.
d) Factors which consider in selecting appropriate method of depreciation.
Organizations need to focus on various factors while selecting appropriate method of
depreciation, as it will directly impact on the income statement as well as earning rate of
organization. Manager by evaluating of the business, nature of assets, rules and regulation
regarding assets, cost of assets, its salvage value, market conditions, obsolescence cost, inflation
rate, technology all these factors are consider while section of specific method which
organization use to calculate depreciation.
Q6: Liabilities and its elements:
Liabilities refer to a type of debt which an individual or an organisation owes and this
requires the individual or the organisation to pay back or give some economic benefit to the
individual or organisation to whom the debt is owed. Liability is the amount that an individual or
an organisation owes to a bank, lender, supplier or other suppliers of loans, inventory, finished
goods and services. These are mentioned in the Liabilities section of the balance sheet., which is
March 55000 % 5 % Lighting system Value of assets
March 230 55000-230 = 54770
April 228 54770 – 228 = 54540
May 227 54313
June 226 54087
By calculating depreciation of both it has been recognized that diminishing method is more
beneficial as value f asst is much higher as compare to straight line method of depreciation (Peng
and Zhou, 2019).
c) Value of heavier bass beat.
Cost incurred on fixing heavier bass beat in sound system, this item is treated as expenses
as it increase value of assets , it includes as revenue generating expense thus it is showcase in
income statement in expense side and it also impact on their balance sheet as value of sound
system has been increase.
d) Factors which consider in selecting appropriate method of depreciation.
Organizations need to focus on various factors while selecting appropriate method of
depreciation, as it will directly impact on the income statement as well as earning rate of
organization. Manager by evaluating of the business, nature of assets, rules and regulation
regarding assets, cost of assets, its salvage value, market conditions, obsolescence cost, inflation
rate, technology all these factors are consider while section of specific method which
organization use to calculate depreciation.
Q6: Liabilities and its elements:
Liabilities refer to a type of debt which an individual or an organisation owes and this
requires the individual or the organisation to pay back or give some economic benefit to the
individual or organisation to whom the debt is owed. Liability is the amount that an individual or
an organisation owes to a bank, lender, supplier or other suppliers of loans, inventory, finished
goods and services. These are mentioned in the Liabilities section of the balance sheet., which is
opposite to the asset section. The International Financial Reporting Standards (IFRS) Framework
define liabilities as “A liability is a present obligation of the enterprise arising from past events,
the settlement of which is expected to result in an outflow from the enterprise of resources
embodying economic benefits.”
Liabilities is classified into three major divisions:
1. Current Liabilities;
2. Non-current Liabilities, and;
3. Contingent Liabilities
Current Liabilities are the liabilities which turns due and are to be paid in the time span of
1 year. Current Liabilities are also known as short term liabilities and consists of debts that are to
be paid in a time period of 1 year. Current Liabilities are continuously assessed by the
management to ensure that the organisation has enough working capital ( current assets – current
liabilities) to comply with the debts and obligations which can arise in the future.
Examples of current liabilities: Creditors, account payables, Income tax payable,
unearned income, bank overdrafts, interest payable, bills payable, short term loans, accrued
expenses etc.
Non Current Liabilities are the liabilities which turns due and are to be paid in the time
span of more than one year. These type of liabilities are really important for the financial
structure of the organisation. These liabilities basically finances the organisation in the long run.
An organisation use non current capital or long term capital to fulfil its immediate capital needs.
Long term liabilities are used to purchase capital assets and invest in capital projects. Long-term
liabilities are critical because it helps the management to determine long term solvency of the
organisation. If organisations will not be able to repay their long-term liabilities as soon as they
get due, the organisations will face a solvency crisis.
Examples of non current liabilities: Long term debt payable, mortgage payable,
debentures, bonds payable, capital leases etc.
Contingent liabilities are the liabilities which depends on the outcome of future events. It
may arise in the future due to some contingencies. Contingent liabilities are also called potential
liabilities. For example, if a company is accused of not following the relevant accounting
standards and the relevant authorities decides to sue the company, the company may have to pay
the penalty amount if it fails to prove its innocence. However if the company is able to prove its
define liabilities as “A liability is a present obligation of the enterprise arising from past events,
the settlement of which is expected to result in an outflow from the enterprise of resources
embodying economic benefits.”
Liabilities is classified into three major divisions:
1. Current Liabilities;
2. Non-current Liabilities, and;
3. Contingent Liabilities
Current Liabilities are the liabilities which turns due and are to be paid in the time span of
1 year. Current Liabilities are also known as short term liabilities and consists of debts that are to
be paid in a time period of 1 year. Current Liabilities are continuously assessed by the
management to ensure that the organisation has enough working capital ( current assets – current
liabilities) to comply with the debts and obligations which can arise in the future.
Examples of current liabilities: Creditors, account payables, Income tax payable,
unearned income, bank overdrafts, interest payable, bills payable, short term loans, accrued
expenses etc.
Non Current Liabilities are the liabilities which turns due and are to be paid in the time
span of more than one year. These type of liabilities are really important for the financial
structure of the organisation. These liabilities basically finances the organisation in the long run.
An organisation use non current capital or long term capital to fulfil its immediate capital needs.
Long term liabilities are used to purchase capital assets and invest in capital projects. Long-term
liabilities are critical because it helps the management to determine long term solvency of the
organisation. If organisations will not be able to repay their long-term liabilities as soon as they
get due, the organisations will face a solvency crisis.
Examples of non current liabilities: Long term debt payable, mortgage payable,
debentures, bonds payable, capital leases etc.
Contingent liabilities are the liabilities which depends on the outcome of future events. It
may arise in the future due to some contingencies. Contingent liabilities are also called potential
liabilities. For example, if a company is accused of not following the relevant accounting
standards and the relevant authorities decides to sue the company, the company may have to pay
the penalty amount if it fails to prove its innocence. However if the company is able to prove its
innocence then no liabilities will arise. As per the accounting standards a contingent liability will
be recorded only when it is probable to happen, which means there is more than 50% chance that
it will happen. The amount of the liabilities can be reasonably estimated (Pokki, Virtanen, and
Karvinen, 2018).
Examples of contingent liabilities are lawsuits, product warranties, new laws and reforms
made by the government which requires the individual or organisation to pay some amount.
1. Provision of warranty: This is a provision that is made by companies who sell their
products with some warranty attached to it. This is because the warranty might give rise
to some liabilities that the company will have to consider in the future by fulfilling the
clause stated in the warranty. Provision of warranty is not a liability as it is not a debt that
is to be paid to some other party. It is a provision which will help the company and give
some financial support to the company so that it will be able to pay any liability which
arises in the future.
2. Unearned Revenue: Unearned revenue refers to the money which is received by an
individual or organisation for the services or goods that has not been delivered or
provided or delivered yet. It can also be refereed as payment for in advance. Unearned
revenue is considered as a liability because the company has to give some economic
benefit to the customers for the advance they have paid to the company.
3. GST Payable: GST payable refers to the money which the organisation or individual has
to pay in order to comply with the GST decided by the government on the products and
services which are provided by the organisation or individual. This has to be paid to the
government and the amount is decided on the basis of rates provided by the government.
GST payable is considered as a liability for the individuals and organisations as they are
financially obliged to pay it to the government.
4. Allowance for doubtful debts: Allowance for doubtful debts refers to the provision
made by the organisations or individuals to prevent them from losses of bad debt. This
allowance is made as credit sale might give rise to some contingencies like bad debts and
to protect the company from losses the management makes this reserve. Allowance for
doubtful debt is not a liability as it is not a debt that is to be paid to some other party. It is
a provision which.
be recorded only when it is probable to happen, which means there is more than 50% chance that
it will happen. The amount of the liabilities can be reasonably estimated (Pokki, Virtanen, and
Karvinen, 2018).
Examples of contingent liabilities are lawsuits, product warranties, new laws and reforms
made by the government which requires the individual or organisation to pay some amount.
1. Provision of warranty: This is a provision that is made by companies who sell their
products with some warranty attached to it. This is because the warranty might give rise
to some liabilities that the company will have to consider in the future by fulfilling the
clause stated in the warranty. Provision of warranty is not a liability as it is not a debt that
is to be paid to some other party. It is a provision which will help the company and give
some financial support to the company so that it will be able to pay any liability which
arises in the future.
2. Unearned Revenue: Unearned revenue refers to the money which is received by an
individual or organisation for the services or goods that has not been delivered or
provided or delivered yet. It can also be refereed as payment for in advance. Unearned
revenue is considered as a liability because the company has to give some economic
benefit to the customers for the advance they have paid to the company.
3. GST Payable: GST payable refers to the money which the organisation or individual has
to pay in order to comply with the GST decided by the government on the products and
services which are provided by the organisation or individual. This has to be paid to the
government and the amount is decided on the basis of rates provided by the government.
GST payable is considered as a liability for the individuals and organisations as they are
financially obliged to pay it to the government.
4. Allowance for doubtful debts: Allowance for doubtful debts refers to the provision
made by the organisations or individuals to prevent them from losses of bad debt. This
allowance is made as credit sale might give rise to some contingencies like bad debts and
to protect the company from losses the management makes this reserve. Allowance for
doubtful debt is not a liability as it is not a debt that is to be paid to some other party. It is
a provision which.
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5. ll help the company and give some financial support to the company so that it will be able
to cover losses which might arises in the future (Tabakov and Paznikov, 2019).
6. A disputable lawsuit: A disputable lawsuit is a lawsuit in which the company is
involved and there is a probability that the company will have to pay the some amount if
the lawsuit turns out to be successful. As there is a contingency that the company will
have to suffer economically if it loses the lawsuit, a disputable lawsuit can be considered
as a contingent liability. A disputable lawsuit is a contingent liability as there is a
probable chance that the organisation or individual will have to pay certain amount which
they did not even consider.
to cover losses which might arises in the future (Tabakov and Paznikov, 2019).
6. A disputable lawsuit: A disputable lawsuit is a lawsuit in which the company is
involved and there is a probability that the company will have to pay the some amount if
the lawsuit turns out to be successful. As there is a contingency that the company will
have to suffer economically if it loses the lawsuit, a disputable lawsuit can be considered
as a contingent liability. A disputable lawsuit is a contingent liability as there is a
probable chance that the organisation or individual will have to pay certain amount which
they did not even consider.
REFERENCES
Books and journals
de Menezes Neto, J. A. and Aguiar, V. R. L., 2019. Redesign of the bank reconciliation interface
of the ContaAzul software. In Handbook of Research on Human-Computer Interfaces
and New Modes of Interactivity (pp. 119-137). IGI Global.
Kuter, M., Gurskaya, M., Andreenkova, A. and Bagdasaryan, R., 2018. Asset impairment and
depreciation before the 15th century. Accounting Historians Journal. 45(1). pp.29-44.
Malitskaya, V., Chirkova, M., Shirobokov, V. and Volkova, N., 2019. Development of accounts
receivable management in Russia. In Education Excellence and Innovation Management
through Vision 2020 (pp. 723-728).
Nasritdinov, J. and Berdiyorov, T., 2020. FACTORS AFFECTING THE AMOUNT OF
DEPRECIATION ALLOWANCES IN THE REPUBLIC OF UZBEKISTAN AND
FORECAST VALUES OF DEPRECIATION ALLOWANCES. Journal of Critical
Reviews. 7(12). pp.641-646.
Peng, J. and Zhou, Z., 2019. Working capital optimization in a supply chain
perspective. European Journal of Operational Research, 277(3), pp.846-856.
Pokki, H., Virtanen, J. and Karvinen, S., 2018. Comparison of economic analysis with financial
analysis of fisheries: Application of the perpetual inventory method to the Finnish
fishing fleet. Marine Policy. 95. pp.239-247.
Tabakov, A. V. and Paznikov, A. A., 2019, January. Algorithms for optimization of relaxed
concurrent priority queues in multicore systems. In 2019 IEEE Conference of Russian
Young Researchers in Electrical and Electronic Engineering (EIConRus) (pp. 360-365).
IEEE.
Books and journals
de Menezes Neto, J. A. and Aguiar, V. R. L., 2019. Redesign of the bank reconciliation interface
of the ContaAzul software. In Handbook of Research on Human-Computer Interfaces
and New Modes of Interactivity (pp. 119-137). IGI Global.
Kuter, M., Gurskaya, M., Andreenkova, A. and Bagdasaryan, R., 2018. Asset impairment and
depreciation before the 15th century. Accounting Historians Journal. 45(1). pp.29-44.
Malitskaya, V., Chirkova, M., Shirobokov, V. and Volkova, N., 2019. Development of accounts
receivable management in Russia. In Education Excellence and Innovation Management
through Vision 2020 (pp. 723-728).
Nasritdinov, J. and Berdiyorov, T., 2020. FACTORS AFFECTING THE AMOUNT OF
DEPRECIATION ALLOWANCES IN THE REPUBLIC OF UZBEKISTAN AND
FORECAST VALUES OF DEPRECIATION ALLOWANCES. Journal of Critical
Reviews. 7(12). pp.641-646.
Peng, J. and Zhou, Z., 2019. Working capital optimization in a supply chain
perspective. European Journal of Operational Research, 277(3), pp.846-856.
Pokki, H., Virtanen, J. and Karvinen, S., 2018. Comparison of economic analysis with financial
analysis of fisheries: Application of the perpetual inventory method to the Finnish
fishing fleet. Marine Policy. 95. pp.239-247.
Tabakov, A. V. and Paznikov, A. A., 2019, January. Algorithms for optimization of relaxed
concurrent priority queues in multicore systems. In 2019 IEEE Conference of Russian
Young Researchers in Electrical and Electronic Engineering (EIConRus) (pp. 360-365).
IEEE.
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