) Deferred Income Taxes for Corporations Contingent Liabilities -Legal Claims (Potential) -Debt Guarantees -Other Contingencies INTEREST & NON-INTEREST NOTES Interest Bearing Notes: Specifies: -A stated rate of interest -Interest is to be paid at maturity in addition to the face or principal amount of the note. Non-Interest Bearing Notes: Does not specify a rate of interest Includes the interest in the face amount of the note An overdue non-interest bearing note immediately draws interest at a legal rate (usually specified by law) from the due date. EXAMPLE: The business needs to borrow $2,000 cash from the bank for 60 days on December 16, 1999 a. interest bearing note, 6% b. non-interest bearing note, $2,040 UNEARNED REVENUES Arise from revenues that have been collected in advance during the current period but will not be earned until a later accounting period. -Also called; Deferred Revenue, Revenue collected in Advance, or Precollected Revenue Unearned Revenues constitute a liability since cash has been collected but the goods or services have not been provided (i.e. the revenue has not been earned) -There is a "present obligation" to render, in the future, the product or services. EXAMPLE: Textbook, page 499 PAYROLL LIABILITIES Recording Employee salary expense and amounts withheld. -Textbook, page 507 Recording Employer Payroll taxes -Textbook, page 508 Payroll Reports, Records and Procedures -Appendix 12A, page 523 Payroll reports are filed within one month after the end of each calendar quarter Payments: -Less than $500, pay with report -Most companies are required to pay monthly or semiweekly -If taxes are over $100,000 they must be paid at the end of the next business day Employers are required to provide employees with a W-2 before January 31 of the following year Companies with many employees often use a special "payroll bank account" to pay employees.
