Liabilities

Current liabilities are defined as: “Debts due to be paid with cash or with goods and services within one year, or within the entity’s operating cycle if the cycle is longer than a year.” (Hongren, Harrison & Oliver, 2012) These liabilities fit into three categories: Current liabilities of known amount; current liabilities that must be estimated; and contingent liabilities. According to the matching principle of accounting, expenses and revenues need to be reported during the same period that they are earned. This can be difficult if the exact amounts are not known. This is the purpose behind estimated and contingent liabilities. In order to provide accurate financial reports companies must record revenues and

Liability- This falls directly on the owner. All debts, liabilities and losses fall on the owner. The owner's assets can be used to alleviate the business's debt.

• Liability: The owner has unlimited liability. When the business fails it is up to the owner to pay all the creditors off.

Liability: The owner/operator of a Sole Proprietorship is subject to full and unlimited financial liability for the business. The owner and the company are legally the same entity. The company’s assets are legally the same as the owner’s personal assets.

LIABILITY – The owner is held responsible for all debts and expenses accrued by the company via the concept of unlimited liability. If the expenses and debts aren’t satisfied, the owner of the business can be sued for breach of contract.

A current liability is defined as a liability that must be paid within one accounting period.

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit

A contingent liability is a potential future obligation to an outside party for an unknown amount resulting from activities that have already taken place. The most important characteristic of a contingent liability is the uncertainty of the amount; if the amount were known it would be included in the financial statements as an actual liability rather than as a contingency.

Based on this information, only an immaterial amount of companies actually accrue a liability in their financial statement. Therefore, M Corporation will simply provide disclosure of the contingency and an estimate of the possible loss or range of loss for the future pending litigation in its 2007 financial statement under Note: Contingencies and Commitments. If M Corporation accrued a liability on its 2007 financial statements, then the company becomes too transparent to opposing counsel and it could have serious adverse effects on M’s operations.

“Liabilities are debts: money you owe. Every business carries some liabilities—for example, ongoing payments to suppliers, rent for your office, compensation to employees, or fees for contractors” (Mancuso, 2014). Added liabilities may result if a business is ravaged by a fire or flood or if the business owner(s) become the victim of a lawsuit—for example, a patron, client or customer decides to sue your company after hurting themselves on company property. It is the intent of this paper to examine the role and responsibility of liability in different types of businesses from sole proprietorships to

Liability for one’s actions means that one can rightly be made to pay for the adverse effects of one’s actions on others. (DeGeorge, 104) Liability does not necessarily involve moral responsibility for the action taking place, although. “Strict liability” stresses that there is no excusing conditions that are accepted or applicable. It is the responsibility placed on somebody who did not act negligently. For example, consider selling a product that has defective problems. You did not intentionally make it defective but you are held liable for it, even though the seller did not intend to have it defective. Corporate liability is different because it is formed to limit the liability of shareholders. It determines the extent to how much they are liable for, unlike strict liability. The corporation can be punished or prosecuted if actions were done for benefits, results from negligence, or due to lack of responsible

Contingent Liability is a condition that refers to the possibility of a future event happening and addresses the responsibility of the party liable should the event take place. In today’s real estate market both sellers and buyers may have contingencies stated in the terms and conditions for selling and purchasing a home. The most common contingent liability are guarantees to debt.

assets of the business owner can be taken to pay off business debts since the two are not

a) Contingent liabilities are potential losses by a company via unforeseen evenst such as court cases, product liability, or disaster. A contingent asset is one that provides unforeseen benefits to the company, which also results from an unforeseen future event. Because this cannot be foreseen in advance, it does not appear on the financial statements of the company, but it can appear on the financial statement notes. In the case of BP, amounts that the company can recover from third parties as part of its contractual rights can be considered contingent assets. These are only recognized int eh accounts if they are a virtual certainty to be received.

Further, the company records their contingent liabilities based on the estimation on the amount likely to be incurred on clearing the contingency. Contingent liabilities are incurred on legal claims on intellectual properties, law suits and paying employee benefits.