Friday, July 3, 2009

the credit side of the balance sheet

the credit side of the balance sheet is break-down into two sections liabilities and equity, this done as follows:
1- current liabilities : current liabilities are those liabilities that will be settled within one year, or during the operating cycle if it is longer than one year. another way of looking at the classification of current liabilities is that they will require either the use of current assets or the creation of other current liabilities to be settled.
Examples of current liabilities are:
- payable s of a variety of sorts arising from the course of business.
- unearned revenues.
- Obligations that, by their terms, are due on demand, even if the "term" of the obligation is greater than one year.
- long-term obligations that are callable at the balance sheet date due to some violation by the company.
current liabilities do not include the following items:
- Debts to be paid by funds that are in accounts classified as non-current.
- the parts of short-term obligations that are intended to be refinanced by long-term order to reclassify these current liabilities into non-current the company must have demonstrated the ability to refinance these obligations.
2- non-current liabilities
non-current liabilities are those that will not be settled within one year, or the operating cycle if the operating cycle is longer than one year.
Examples of non-current liabilities are:
- long-term notes or bond payable.
- liabilities from capital leases.
- pension obligation.
- Deferred Tax liabilities.
- Obligations under warranty agreements.
- Advances for long-term commitments to provide goods and services, and long-term deferred revenue.
3- Equity\Net assets.
the residual interest in the assets of an entity that remains after deducting its liabilities, the equity section consists of the following:
- common stock, preferred stock.
- Additional-paid-In-Capital.
- Retained Earning.

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