Reporting and Interpreting Liabilities
My favorite chapter in this course was chapter 10, reporting and interpreting liabilities. The chapter encompassed different components of liabilities. Liabilities are obligations arising from past transactions or events to an entity. The settlement of these events usually results in outflows. The chapter was divided into various subsections and each discussed the components of liabilities fully. Its first subsection: the role of liabilities in financing a business discussed why liabilities are there in all organizations in order to satisfy the accounting equation assets is equal to liabilities plus the owner’s equity. Furthermore, the chapter discussed the various liabilities such as current and long-term liabilities with relevant examples and format. The terms of interest were discussed and how the asset and liabilities are adjusted when a transaction occurs. This chapter remains my favorite because I learnt how debts of a business represent the creditor’s claims on business assets.
There are three concepts that I found most challenging in this course. The first concept was analyzing and recording bond liability transactions. Understanding how a bond serves as a financial instrument in outlining future payments a company promises to make in exchange for receiving a sum of money proved to be a challenge. The instructor taught about all aspects of a bond, the face value, the stated interest rate and maturity date, bond retirement and recording the bonds in the balance sheet. With relevant examples and clear explanation, the concept with time became better. The second concept that proved difficult was accounting for contingent liabilities. It was clear that contingent liabilities arise because of past transactions or events but their contingent is dependent on future events. What was challenging was to understand when the liabilities contingency was probable, possible or remote according to the accounting rules. The third concept was in accounting types of current liabilities under payroll deductions. The liabilities related to payroll were hard to interpret and record. Moreover, feeding in the taxes related to employer’s payroll was a challenge.
The easiest concept was calculating and interpreting the quick ratio and the times interest earned ratio. The financial ratios were easier to appreciate on how they are commonly used to assess a company ability to generate resources to pay future amounts owed. The formulas for calculating these ratios were easier to understand. Furthermore, the teacher taught with relevant examples therefore making the section easy and interesting. The next section that was easy to understand was the section of recording and analyzing the various types of current and long-term liabilities. The various types of liabilities such as accruals and accounts payable were easier to comprehend and the teacher used real life situations to explain them making the concept easy.
The suggestion I can make for improving this course is to add more assignments after every section learnt. The assignments will enhance a clear understanding to the different concepts of accounting. For instance, the recording and analyzing of bond transactions needed more guidelines and the assignments would have enhanced this. The assignments to my opinion will help improve the course. The accounting information will be very useful to me in the future. My goal is to work for a financial company and later on invest on an auditing company. Learning the various concepts of accounting will give me the foundation I will need to build up my dreams. The chapter for recording and analyzing liabilities has helped me get the view of how to treat debts and claims in companies. Moreover, I have learnt the various sources of acquiring capital and the terms required to pay up these loans. The accounting information will serve as a great startup for my future profession.