Accounting for liabilities

• liabilities are things of value which are owing by the business to others, such as money borrowed
• liabilities arise under normal conditions because the business acquires goods and services, or cash, on the basis that it pays for the goods and services, or refunds the cash, at a later date
• current liabilities are those in which are expected to be repaid in total during the 12 month period
• accounts payable, GST control, Wool advance and bank overdraft are examples are current liabilities
• accounts payable represent the amounts owed to trade creditors that provide inputs and supplies to the business
• GST control are control accounts for what it is owed to or from the federal government for the goods and services tax (GST)
• non current liabilities are those in which are not expected to be repaid in total in the 12 months
• loans from financial institutions are examples of non current liabilities
• plant and equipment loans are examples of non current liabilities
• non current liabilities are external liabilities
• overdraft is an example of a short term loan
• wool or grain being sold is an example of a short term loan
• credit offers from suppliers are considered short term loans
• machinery loans are an example of a medium term loan (3-5 yrs)
• land, mortgages and term and development loans are examples of long term loans (15-25 yrs)
• the interest on overdraft is high (1 year to repay)
• the interest on credit card is very high (30 days to repay)
• interest on creditors is low to high - most creditors allow an interest free period
• interest on term debt is medium to low
• interest on concessional government loans is very low
• interest on seasonal finance (crop lien) is medium to high - used to finance input costs
• interest on machinery finances is low to medium