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- Title
WHEN IS A LIABILITY?
- Authors
Trumbull, Wendell P.
- Abstract
Credit balance as a liability in the balance sheet has recently become a question of greater interest. The following discussion is concerned primarily with future expenditures that are related to operations. One characteristic of liabilities to be emphasized is their relationship with assets already recognized. For proper reporting of financial position, liabilities must be matched properly with assets recognized. In many ways this matching on the balance sheet runs parallel to the matching of expenses with revenues in the income statement. Secondly, where installment sales are recognized as revenue when made, but become taxable revenue only as collected, the full amount of assets to be received from given installment sales is recognized at the time of the sales. Since the future income taxes to be paid at the time of collection are directly related to and payable out of assets already recognized, there is no question but what the deferred income tax on such receivables is a liability in the broad sense of the term.
- Subjects
FINANCIAL statements; TAX auditing; CONDITIONAL sales; INCOME accounting; OPERATING costs; OVERHEAD costs; REVENUE accounting; OPERATING budgets; ORDINARY income; INSTALLMENT method of accounting
- Publication
Accounting Review, 1963, Vol 38, Issue 1, p46
- ISSN
0001-4826
- Publication type
Article