Getting a Current Liabilities Balance
Now that a structure for journals and ledgers has been defined, it's straightforward to move amounts for liabilities into the balance sheet (see Figure 4.10).
Figure 4.10 The balance sheet for Bell Books, June 2011 (liabilities and owner's equity) links directly to the general ledger's asset and liability accounts.
Notes payable, accounts payable, and owner's equity on the balance sheet are linked to their general ledger balances.
Although this example illustrates only two types of liabilities, accounts payable and notes payable, other types of liabilities exist that you might need to include in your ledger accounts:
- Taxes payable—You often need to estimate the taxes due on both income and salaries. You should consult an accountant or tax lawyer to determine the percentage rates to apply against your estimated income and estimated salaries. With these amounts, you can establish journal and ledger accounts that contain the proper estimates.
- Salaries payable—Often you pay employees' salaries before closing your books for a given accounting period. When that occurs, the days that elapse after payment is made and before the books are closed usually result in the accrual of salary amounts. You need to pay those accruals after closing the books. Journal and ledger accounts that accumulate these salaries help you keep track of these liabilities.
- Interest payable—Depending on whether a note is discounted, you might want to account for interest on the note on a periodic basis instead of on the date that the note is actually paid. An interest payable account allows you to accrue this liability over time.
- Unearned revenue—Sometimes a customer pays you for a product or service that won't be delivered until after the books are closed. In that case, the revenue represents both an asset in the cash account and a liability (until delivery has occurred), which you can account for with an unearned revenue account.
- Long-term debt—If you have taken out a loan whose payable date is longer than a year from the date that the books are closed, you should keep this amount separate from the Current Liabilities section of the balance sheet. Its amount would be listed in a separate account, perhaps named Long-Term Debt, and listed in the Long-Term Liabilities section of the balance sheet.