Describe current and long-term liabilities and their characteristics. Liabilities are probable future payments of assets or services that past transactions or events obligate an entity to make. Current liabilities are due within one year or the operating cycle, whichever is longer. All other liabilities are long term.

Identify and describe known current liabilities. Known (determinable) current liabilities are set by agreements or laws and are measurable with little uncertainty. They include accounts payable, sales taxes payable, unearned revenues, notes payable, payroll liabilities, and the current portion of long-term debt.

Explain how to account for contingent liabilities. If an uncertain future payment depends on a probable future event and the amount can be reasonably estimated, the payment is recorded as a liability. The uncertain future payment is reported as a contingent liability (in the notes) if (a) the future event is reasonably possible but not probable or (b) the event is probable but the payment amount cannot be reasonably estimated.

Compute the times interest earned ratio and use it to analyze liabilities. Times interest earned is computed by dividing a company's net income before interest expense and income taxes by the amount of interest expense. The times interest earned ratio reflects a company's ability to pay interest obligations.

Prepare entries to account for short-term notes payable. Short-term notes payable are current liabilities; most bear interest. When a short-term note's face value equals the amount borrowed, it identifies a rate of interest to be paid at maturity.

Compute and record employee payroll deductions and liabilities. Employee payroll deductions include FICA taxes, income taxes, and voluntary deductions such as for pensions and charities. They make up the difference between gross and net pay.

Compute and record employer payroll expenses and liabilities. An employer's payroll expenses include employees' gross earnings, any employee benefits, and the payroll taxes levied on the employer. Payroll liabilities include employees' net pay amounts, withholdings from employee wages, any employer-promised benefits, and the employer's payroll taxes.

Account for estimated liabilities, including warranties and bonuses. Liabilities for health and pension benefits, warranties, and bonuses are recorded with estimated amounts. These items are recognized as expenses when incurred and matched with revenues generated.

Identify and describe the details of payroll reports, records, and procedures. Employers report FICA taxes and federal income tax withholdings using Form 941. FUTA taxes are reported on Form 940. Earnings and deductions are reported to each employee and the federal government on Form W-2. An employer's payroll records often include a payroll register for each pay period, payroll checks and statements of earnings, and individual employee earnings reports.