Podcast
Questions and Answers
Which type of liability is supported by oral or informal promises to pay by the debtor?
Which type of liability is supported by oral or informal promises to pay by the debtor?
- Salaries payable
- Accounts payable (correct)
- Interest payable
- Notes payable
Which type of liability is supported by written or formal promises to pay by the debtor in the form of promissory notes?
Which type of liability is supported by written or formal promises to pay by the debtor in the form of promissory notes?
- Notes payable (correct)
- Accounts payable
- Salaries payable
- Interest payable
Which type of liability arises from interest-bearing liabilities and represents interest incurred but not yet paid?
Which type of liability arises from interest-bearing liabilities and represents interest incurred but not yet paid?
- Accounts payable
- Notes payable
- Salaries payable
- Interest payable (correct)
Which type of liability represents salaries already earned by employees but not yet paid by the business?
Which type of liability represents salaries already earned by employees but not yet paid by the business?
Which type of liability represents utilities (e.g., electricity, water, telephone, internet, cable TV, etc.) already used but not yet paid?
Which type of liability represents utilities (e.g., electricity, water, telephone, internet, cable TV, etc.) already used but not yet paid?
Flashcards
Accounts Payable
Accounts Payable
A liability based on an informal agreement, where the debtor promises to pay verbally or in writing without a formal contract.
Notes Payable
Notes Payable
A liability supported by a formal written promise to pay, often in the form of a promissory note.
Interest Payable
Interest Payable
A liability representing interest accrued on borrowed money but not yet paid.
Salaries Payable
Salaries Payable
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Utilities Payable
Utilities Payable
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Study Notes
Types of Liabilities
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Oral or Informal Promises
- Represented by verbal commitments made by a debtor to repay a debt.
- Generally categorized as unsecured liabilities due to lack of formal documentation.
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Written or Formal Promises (Promissory Notes)
- Established through formal agreements known as promissory notes.
- These documents clearly outline the terms of the debt, including repayment schedules and interest rates.
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Interest-Incurred Liabilities
- Arise from interest-bearing obligations where interest has accrued but remains unpaid.
- Reflects the financial cost of borrowing that has accumulated over time but is yet to be settled.
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Salaries Payable
- Linked to compensation earned by employees which has not yet been disbursed.
- Represents an obligation for businesses to pay their workforce for completed labor.
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Utilities Payable
- Incorporates expenses for services such as electricity, water, and telecommunications that have been consumed but not paid for.
- This liability highlights ongoing operational costs that the business needs to address.
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Description
Test your knowledge of liabilities with this quiz! Learn about accounts payable, notes payable, and interest payable. Improve your understanding of these financial obligations and their impact on a company's balance sheet.
