Short Debt

Accounting for Short Term Debt Obligations
Page 541

General –
1. Liabilities that are short term in nature are not discounted.
They are shown at face value.
2. Examples :
i) Accounts Payable
ii) Notes Payable
iii) Miscellaneous Taxes
iv) Property taxes
v) Payroll taxes
vi) Sales Taxes


Short Term Operating Liabilities
3. Most goods are purchased on Credit
4. Accounts Payable is reserved for purchase of materials in a manufacturing company, and merchandise in a retailing company.
5. Other short term liabilities are stated separately.
6. If discounts are expected to be taken then the liability should be reported net of the expected discount.


Short – Term Debt
7. Promissory Note – formal written promise to pay a sum of money in the future. Usually reflected on the Debtors Books as Notes Payable

8. Two Types of Promissory Notes:
i) Trade Notes Payable – note issued to trade creditors for pu...