Since the goods/services have not been provided yet by the firm, this is termed as ‘unearned revenue’. Unearned Revenue: This represents advances received from customers on account of the sale of goods/services.Accrued expenses are expenses that have been incurred and recorded in the balance sheet but are yet to be Examples include salaries for the previous month that are payable in the next month. Accrued Expenses: In the accrual accounting system, the company recognizes expenses when they are incurred, regardless of whether payment has been made.Only the unpaid interest up to the balance sheet date is reported as a liability.
The company does not record the interest on the loan related to the future on the balance sheet.
Interest Payable: This represents the interest on loans taken, bonds issued, etc., payable by the firm. Income taxes are payable: This represents the taxes, such as Income Tax, Sales Tax, etc., payable by the firm. They are payable to the suppliers of goods/services for the services utilized by the company. Accounts Payable: These are also known as Trade Creditors. Examples include discounts on bonds payable, discounts on notes payable, etc. This explains the usage of the term ‘contra’ since their debit balance is ‘contrary’ to the usual credit balances of liability accounts. However, certain accounts known as ‘contra-liabilities’ accounts have debit balances. In that case, the company actively shows them as liabilities in the Balance Sheet and records the estimated loss in the income statement.įor example, if the company has been sued for $10,000 and there is a 70% probability that it will lose the case and pay the damage amount, it should be recorded in the Balance Sheet as a liability.Īsset accounts usually have debit balances, while liability accounts have credit balances. Suppose the probability of occurrence is high and can be estimated. If the probability of occurrence is less than 50%, they are depicted as footnotes in the Balance-sheet. They can become liabilities in the future and are also called ‘potential liabilities’. Contingent Liabilities: Contingent liabilities are those for which the company is still not legally responsible. Current Liabilities: Current Liabilities are payable within 12 months (or the company’s operating cycle)from the date of the Balance Sheet. These are payable after a period of 12 months or more from the date of the Balance Sheet. Non-Current Liabilities: Non-current liabilities are long-term liabilities. There are mainly three types of liabilities on a Company’s Balance Sheet: In such cases, the companies ‘defer’ revenue reporting and recognize the amounts earned as a liability named ‘Unearned revenue’. Liabilities also arise if an amount is received for goods/services that are yet to be provided. Hence, they usually have the word ‘payable’ in them. Liabilities are obligations of the company that arise from past transactions. #Are expenses liabilities on a balance sheet download
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