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Accounting Chapter 9 Outline/Study Guide

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by: Katie Mulliken

Accounting Chapter 9 Outline/Study Guide ACCT2101

Marketplace > University of Georgia > Accounting > ACCT2101 > Accounting Chapter 9 Outline Study Guide
Katie Mulliken
GPA 3.91

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Accounting Chapter 9 (McGraw Hill Connect Textbook) Detailed Outline and Study Guide
Intro to Accounting 1
Study Guide
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"Yes please! Looking forward to the next set!"
Cornelius Reinger Jr.

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This 4 page Study Guide was uploaded by Katie Mulliken on Thursday March 31, 2016. The Study Guide belongs to ACCT2101 at University of Georgia taught by Bhandarkar in Spring 2016. Since its upload, it has received 14 views. For similar materials see Intro to Accounting 1 in Accounting at University of Georgia.


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Yes please! Looking forward to the next set!

-Cornelius Reinger Jr.


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Date Created: 03/31/16
Chapter 9 – Reporting & Analyzing Current Liabilities Liability – company’s present obligations to future payment that occurred as a past transaction/event... 3 key factors of a liability: 1) A past transaction or event 2) A present obligation 3) A future payment of assets or services Current Liabilities (short term liabilities) – obligations to pay within 1 year OR within the company’s operating cycle, whichever is longer (the focus of our class)  Known Liabilities – Obligations of company with little uncertainty. Set by agreements, contracts, or laws. Also called Definitely Determinable Liabilities... ~ Most common ~  Estimated Liabilities – Known obligation with uncertain amount that can be estimated Known/ Determinable Liabilities: o Health and Pension Benefits o Accounts Payable o Bonus Plans o Sales Tax Payable o Warranty Liabilities  Matching Principle says seller reports o Unearned Revenues expected warranty cost in period when o Short-Term Notes Payable o Taxes Payable revenue from sale is reported (liability) o Lease Liabilities o Vacation Benefits  Paid/Compensated Absences o Payroll Liabilities  Vaca Benefit Expense–operating o ^ Include: Payroll Tax, Salary/Wage expense Expense, Benefits (vaca, medical…)  Vaca Benefit Payable – current liability Estimated Liabilities: Long Term Liabilities – company’s obligations to pay after 1 year OR within the company’s operating cycle, whichever is longer o Examples: o Long-Term Notes Payable * Remember * o Warranty Liabilities Notes are issued: o Lease Liabilities 1) To extend credit period o Bonds Payable 2) When cash is borrowed o Estimated Liabilities Employee Payroll Deductions Gross Pay of Employee – Payroll Deductions/ Withholdings: FICA Taxes – Social Securi(retirement, disability, survivorship) FICA Taxes – Medicare Federal Income Tax State/Local Income Taxes Voluntary Deductions (union dues, charity, medical/life insurance premiums, pensions) = Net Pay for Employee FICA  Federal Insurance Contributions Act * In 2013, 0.9% added Medicare Tax put on workers making $200,000+ (not imposed on employer)  Social Security Taxes – 2013* 6.2% of the 1 $113,700 earned in a year. Max is $ 7, 049.40  Medicare Taxes – 2013* 1.45% of all wages earned in a year Employee Deduction for Income Tax – Amounts withheld depend on an employees salary, tax rates, & # of withholding allowances* (income level, marital status, dependable, etc.)  Employers must pay the taxes withheld from workers’ gross pay to the right gov. agency  * Allowances reduce the amount of taxes an employee owes the government Employer Payroll Taxes Employers pay more payroll taxes than employees’  Unemployment Taxes: FUTA & SUTA FICA  Employers must pay withheld taxes to the Internal Revenue Service (IRS) st  Social Security Taxes – 6.2% of the 1 $113,700 earned by each employee in a year  Medicare Taxes – 1.45% of all earnings of each employee in a year FUTA  Federal Unemployment Taxes Employers are subject to federal unemployment tax on the salaries paid to their employees  Employers required to pay .6% of the 1 $7,000 earned by each employee SUTA  State Unemployment Taxes States support their unemployment programs by placing a payroll tax on employers  Most states SUTA tax is 5.4% of the 1 $7,000 paid to each employee  Base rate adjusted to employer’s Merit Rating (tells business's stability in employing staffs) Internal Control is important for payroll accounting. Managers must monitor: 1) Employee Hiring 2) Timekeeping 3) Payroll Listings 4) Payroll Payments Current Portion of Long-Term Debt Portion of long-term debt due within 1 year or the operating cycle (whichever is longer)  Long-Term Debt reported under long-term liabilities  Current Portion Due is reported under current liabilities o Note: accounts payable, sales tax, salary expense are almost always current liabilities Sales tax can be found from Total Sales Receipts when sales tax isn’t separate on register… Sales = Total Sales Receipts ÷ ( 1 + Sales Tax Percentage ) Ex: Assume 5% sales tax & $420 in total sales receipts (includes sales t $420 ÷ 1.05 = $400 Contingent Liability Possible obligation that depends on a future event arising from a past event (ex: lawsuit) 3 different possibilities that determine the ability to estimate possible future amounts owed: 1) Probable (Likely) – amount owed can be reasonably estimated  Amount recorded as a liability (warranties, vacation pay, income taxes) 2) Possible – the future event is reasonably possible  Information about the event is recorded in notes to the financial statements 3) Remote – if the future event is unlikely, don’t record or disclose information ** Note: Full-Disclosure Principle requires information relevant to decision making to be reported ** Other examples of Contingent Liabilities: Environmental damages, possible tax assessments, insurance losses, & gov. investigations


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