Current liabilities are due within the current operating cycle, which is usually a year. Examples of current liabilities include accounts payable, sales tax payable, unearned revenues, and short term notes payable. The payroll process also creates current liabilities. A business may know that a liability exists but not know the exact amount. In these cases, the company will estimate the amount. Common examples include bonus plans, health benefits, and warranties. A contingent liability is a potential rather than an actual liability, because it depends on future events.
Answer the following questions in your post:
What factors determine whether contingent liabilities must be recorded? What are the current liabilities that must be estimated? Include bonus plans, vacation, health, pension plans, and warranties in your explanation. What liabilities are created by the payroll process? Why is this important to know?
