UNDERSTANDING ACCOUNTING TALK 12: Current Liabilities
The Current Liabilities accounts generally and commonly used are: Accounts Payable, Notes Payable, Accrued Interest Payable, current portion of Loans Payable, payables to the government (e.g., taxes, social security premiums, etc).
The portion of Loans Payable not due within the year is normally separated from the current portion and is an account under Noncurrent Liabilities. Occasionally, especially in large corporations, the Noncurrent Liabilities include Bonds Payable.
Accounts Payable are directly connected to the operations or activities of a corporation, a small business or proprietorship; e.g. supplies bought on credit for use in operations or services engaged to pursue a related activity.
Notes Payable is a promissory note of the corporation, small business or proprietorship. Sometimes, an Accounts Payable becomes a Notes Payable. This is when a supplier comes to collect on due date and no funds are currently available for the payment. In this case, the supplier becomes a creditor and asks to be secured by a promissory note.
Accrued Interest Payable is the interest incurred but not yet paid.
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POSTED IN: Accounting for NonAccountants, Liabilities
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