obligations is an essential element in the financial report.They are divided into two types: the current (short-term) and non-current (long-term).The classification takes place on a temporary basis.
Current liabilities - liabilities that require for their elimination current resources.These include:
- accounts payable;
- dividends to be paid;
- short-term notes;
- announcements;
- accrued liabilities;
- tax payments;
- refundable deposit;
- conditional payment;
- unearned income prepaid;
- part of long-term debt, which must be paid in the current period;
- payable on demand.
Thus, short-term liabilities are repaid out of current funds.This is a resource that could be used for the organization of daily activities.That is the main difference between the current assets from long-term.Current resources are another sign - they turn into money or completely used in a single budget period.Usually it refers to the calendar year.
Current liabilities are classified according to several criteria.
1) Liabilities are associated with operations:
- payables for acquisition of raw materials, materials, goods;
- advances received;
- rents;
- taxes;
- monthly wage of staff and management.
2) Short-term liabilities to be settled within 12 months of the balance sheet:
- debt on fixed assets;
- long-term liabilities payable in the next 12 months from the date of reporting.
3) The amounts that will be required to repay the cost over the next 12 months from the date of the balance sheet:
- bonuses;
- compensation for holidays;
- Other.
Current liabilities are conditional type.They arise due to the fact that there are factors that contribute to the uncertainty about future profits (losses).An example is the risk of disasters.When these uncertainties are several degrees of probability: 1) large;2) the possibility;3) small.
consider several kinds of short-term liabilities.
1) Accounts receivable - accounts for certain goods or services that are purchased for the business enterprise.The maturity of such an obligation is usually stipulated in the contract.
2) Short-term notes is essentially similar to the accounts payable.The main difference is that they used to pay for goods and services that can not be acquired for the main activities of the company.
3) Part of the long-term debt, which should be covered in this reporting period.This amount ranked as short-term liabilities and deducted from non-current debt.
4) Transfers, which the company makes at the request of the lender.These payments are also reflected as current liabilities on the balance sheet.
5) Accrued fees includes: staff salaries, interest on loans.
6) Advances and deposits are non-refundable.Such payments have become a popular form of relations between subjects of the market.For example, the company requests an advance, which is a partner in case of failure of the deal is a good source to cover losses, penalties, etc.
7) Prepaid income arises in situations where the cash comes into the company before as a service or delivery of goods will be carried out.For example, sale of airline tickets.
8) Tax - withholding of funds in favor of local or central government.
9) debts incurred in connection with non-payment of holidays to employees.This situation occurs if the workers do not use the days for holidays during the year.
10) Dividends paid to holders of shares and bonds compulsorily payable after summing up and submission of reports for the year.
Short-term liabilities of the enterprise must be paid on time.Otherwise, the sum of payment may be added here in the future and penalties.
