Lecture Notes: Accrued Liabilities (AC203 Module 3, Lesson 7)

Instructor

• William Terando
• Presented on May 10, 2018

Overview

• The lecture focuses on accrued liabilities, a key topic in accounting.

What are Accrued Liabilities?

• Accrued liabilities refer to expenses that have been incurred but not yet paid.
• Common in accounting practices to ensure that financial statements accurately reflect the company's financial position.

Importance in Financial Reporting

• Ensures that expenses are recognized in the period they are incurred.
• Helps in matching revenues with expenses, which is crucial for accurate financial reporting.

Common Examples

• Interest Payable: Interest that has been incurred but not yet paid.
• Wages Payable: Salaries and wages owed to employees at the end of an accounting period.
• Taxes Payable: Taxes that have accrued but not yet been paid to the government.

Accounting for Accrued Liabilities

• Requires adjusting journal entries at the end of an accounting period.
• Journal Entry Example:
  • Debit the expense account
  • Credit the accrued liability account

Impact on Financial Statements

• Affects both the balance sheet and the income statement.
• Increases liabilities on the balance sheet.
• Increases expenses on the income statement, reducing net income.

Key Takeaways

• Accrued liabilities are a critical component of the accrual basis of accounting.
• Important for ensuring the accuracy and completeness of financial statements.

These notes provide a summarized reference for the key concepts and examples discussed in the lecture on accrued liabilities. Make sure to review examples and practice accounting entries to fully grasp the subject.