• Identify a company, business, or organization in your community (it can be one for which you work), and share some examples of current and long-term liabilities for that company. Reflect on the financial statement presentation requirements for the companys current and long-term liabili ties. Based on the Unit VII Lesson, what changes would you make, if any? Why, or why not?

  Your journal entry must be at least 200 words in length. Lesson below:

• Liabilities

  It has been previously established that the accounting equation is Assets = Liabilities + Equity. The accounting equation can also be written as Assets Liabilities = Equity. In this equation, the liabilities of a business require the use of assets to satisfy the amount owed. There are two claims to the assets of a business; these claims are the creditors and the owners. This lesson will cover current liabilities (and payroll accounting) and long-term liabilities.

  A liability is an amount owed to lenders, suppliers, or government agencies and requires the use of assets or future revenue to satisfy the debt. There are two categories of liabilities: current liabilities and long-term liabilities. A current liability is the amount owed that must be paid within 1 year or within the companys operating cyclewhichever is longer (Miller-Nobles et al., 2018). The second liability is a long-term liability, which includes any liabilities that become due beyond a year (or longer). The most common current liability is accounts payable. An accounts payable is an amount due to a vendor for supplies or products and supplies or services (Miller-Nobles et al., 2018). Retail businesses will also have sales tax payable. Sales tax payable is the amount of sales tax collected by the retailer that must be remitted to the tax agencies (Miller-Nobles et al., 2018). Because the accounts payable and sales tax payable are due within 1 year (generally, due within 30 days), they are considered a current liability. Some businesses will receive cash payments in advance of providing a service, which is referred to as unearned revenue (or deferred revenue). Many gyms and fitness centers will have deferred revenue. If you have ever paid for a year-long membership at the beginning of the year to receive a discount, then you were involved in a transaction with unearned revenue. The gym does not earn the revenue until it has provided you with the monthly membership. For example, if you were to purchase a 1-year membership for $600, the gym would debit cash for $600 and credit unearned revenue for $600 (a liability). As each month passes and you do not discontinue your membership, the gym will record revenue every month. Each month, the gym will record $50 of revenue ($600 divided by 12 months). The gym will debit unearned revenue and credit revenue for $50. Long-term liabilities are liabilities that will become due beyond 1 year or beyond the companys operating cycle (Miller-Nobles et al., 2018). A mortgage payable, note payable, or bonds payable are examples of longterm liabilities. Generally, most long-term liabilities have a current portion as well.

  Conclusion

  This lesson focused on current liabilities (and payroll accounting) and long-term liabilities. Businesses of any kind (e.g., for-profits, nonprofits, governmental, associations) will have liabilities during the normal course of business. Those liabilities may be short-term (less than 12 months) or long-term (longer than 12 months)