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Determinable Current Liabilities

Moneyzine Editor
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Moneyzine Editor
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January 16th, 2024
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Determinable Current Liabilities

Definition

The financial accounting term determinable current liabilities refers to near-term debt obligations that can be precisely measured. To qualify as a determinable current liability, the debt obligation is reasonably expected to come due in a single operating cycle or one year. There must also be certainty about the existence of the obligation, as well as the amount owed.

Explanation

Current liabilities are defined as debts that must be paid within one year or one operating cycle, whichever is longer. The amount shown on a company's balance sheet is the full maturity value. Also known as definitely determinable liabilities, this debt obligation must pass two tests to qualify for this classification:

  • The obligation is known to exist. There is no doubt the amount is owed to another entity.

  • The amount owed is quantifiable. The obligation can be measured precisely.

Examples of determinable current liabilities include:

  • Accounts Payable: also known as trade accounts payable, this includes money owed others for goods and services rendered but not yet paid.

  • Notes Payable: includes the current portion of long-term debt, trade notes, and short term loans. Notes payable are obligations associated with some form of written promissory note.

  • Dividends Payable: the amount owed to shareholders following the authorization by the company's board of directors.

  • Taxes: includes sales, Social Security, as well as other payroll deductions collected by the company but not yet paid to the government agency.

  • Accrued Liabilities: unpaid expenses resulting from a prior contractual agreement with another party. Includes property taxes, payroll taxes, wages payable, and compensated absences.

  • Unearned Revenues: money collected from customers for goods or services to be rendered in the future. Examples include the advanced payment for a subscription (newspaper, magazine) in addition to gift certificates issued but not yet redeemed.

In addition to definitely determinable liabilities, a company can also have contingent liabilities. This second classification includes debt obligations that depend on one or more future events to confirm the amount owed such as litigation claims, pending assessments, warranty and guarantee losses, as well as coupons offered to customers.

Related Terms

  • Current Liabilities
    The financial accounting term current liabilities are generally defined as any debts that must be paid within one year or one operating cycle, whichever is longer. Current liabilities are a subcategory of liabilities, which appear on a company's balance sheet.
    Moneyzine Editor
    Moneyzine Editor
    January 12th, 2024
  • Contingent Current Liabilities
    The financial accounting term contingent liabilities refers to near-term debt obligations that cannot be precisely measured, or the actual existence of the liability is uncertain. Contingent liabilities are classified as a current liability if the debt obligation is reasonably expected to come due in a single operating cycle or one year.
    Moneyzine Editor
    Moneyzine Editor
    January 12th, 2024
  • Accounts Payable
    Also referred to as "payables," this is the accounting term used to describe balances owed to trade partners for materials, supplies, goods and services that were purchased on credit. Accounts payable recognizes the timing difference between the company's receipt of the benefit or asset, and the payment for this expense.
    Moneyzine Editor
    Moneyzine Editor
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  • Dividends Payable
    The financial accounting term dividends payable is used to describe the cash owed by a company to its stockholders, based on a distribution that has been formally authorized by the company's board of directors. Dividends payable are categorized as a current liability on the company's balance sheet.
    Moneyzine Editor
    Moneyzine Editor
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  • Income Taxes Payable
    The financial accounting term income taxes payable is used to describe money owed to government authorities but not yet paid. Income taxes payable appears in the current liabilities section of the company's balance sheet.
    Moneyzine Editor
    Moneyzine Editor
    January 22nd, 2024
  • The financial accounting term unearned revenue refers to revenues received in advance of rendering a service or providing goods to customers. Unearned revenues are recorded as a liability since it represents an obligation of the company derived from a transaction that occurred in the past.
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  • The financial accounting term valuation of current liabilities refers to the approach used to quantify debt obligations that are reasonably expected to come due in a single operating cycle or one year. While most liabilities are recorded on the balance sheet at the present value of the future outlays of cash required to eliminate this debt, current liabilities are typically recorded at their full maturity amount.
    Moneyzine Editor
    Moneyzine Editor
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