What Is Negative Gearing?

Liabilities refer to the current obligations of an enterprise resulting from past transactions or events that are expected to cause economic benefits to flow out of the enterprise.

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To recognize an existing obligation as a liability, in addition to meeting the definition of liability, two conditions must be met at the same time:

First, the economic benefits related to the obligation are likely to flow out of the enterprise;

It can be seen from the definition of debt that it is an essential characteristic of debt to expect that economic benefits will flow out of the enterprise. In practice, the outflow of economic benefits required to perform obligations is subject to uncertainty, and especially the economic benefits associated with inferred business usually require a large number of estimates. Therefore, the recognition of liabilities should be combined with the judgment of the degree of uncertainty of the outflow of economic benefits. If there is conclusive evidence that the economic benefits related to the current obligation are likely to flow out of the enterprise, it should be recognized as a liability; otherwise, if The enterprise has assumed the current obligations, but the possibility of causing the outflow of the company's economic benefits is very small, it does not meet the recognition conditions for liabilities and should not be recognized as a liability.

Second, the amount of future economic benefits can be measured reliably.

The recognition of liabilities shall be able to be reliably measured for the amount of future economic benefits flowing out of the enterprise while considering the economic benefits flowing out of the enterprise. The amount of outflow of economic benefits related to statutory obligations can usually be determined according to the amount stipulated in the contract or the law. Considering that the amount of outflow of economic benefits is usually in the future period, and sometimes the future period is longer, the measurement of the relevant amount needs to consider the time value of money And other factors. For the outflow of economic benefits related to the inferred business, the enterprise should make an estimate based on the best estimate of the expenditure required to perform the relevant obligations, and consider the impact of factors such as the time value of money and risks. ^[1]

(1) Liabilities are the current obligations assumed by the enterprise.

Liabilities must be borne by the business

Liabilities are generally classified according to their repayment speed or length of time

1. Audit of current liabilities.

Current liabilities refer to the debts that an enterprise will repay within one year or in a business cycle that exceeds one year, including various payables and advance receipts and short-term loans. The main points of audit of accounts payable, bills payable, and accounts received in advance are as follows:

(1) Accounts payable.

Authenticity: Examine and confirm whether there are any accounts payable, adjustment of costs and depreciation of assets, and letter verification if necessary.

Integrity: Review and confirm whether there is any missing account payable and the balance of debts is reduced. If necessary, perform a zero balance letter of confirmation, that is, a letter of confirmation to a regular supply unit with a zero detailed account balance.

Ownership: Find out when the invoice was received but not credited.

Valuation: Determine whether the enterprise chooses the total method or the net value method, and then find out the correctness of the method application and calculation.

Account correctness: find out the consistency between the accounts payable detail ledger and the general ledger balance.

Legitimacy: Examine and confirm whether there are any illegal or illegal activities using accounts payable to post accounts, such as withholding income.

(2) Bills payable.

Authenticity and completeness: Through the examination of the original vouchers and letters of verification, it is found whether there are any false or missing items.

Pricing: Find out whether the bills payable are recorded at face value; if discounted, determine the correctness of the discount and the correctness of the net value of the bills payable minus the discount.

Classification: Investigate the transfer of overdue notes principal and interest into accounts payable.

Full disclosure: Find out the disclosure of overdue bills and bills posted in accounting statements.