Question

Accounting for debt is important in businesses. Understanding the accounting for current and long-term liabilities is important in understanding the solvency of a business. In this Discussion, you will look at how businesses finance operations through debt.

Sunner Company obtains $20,000 in cash by signing a 9%, 6-month, $20,000 note payable to First Bank on July 1. Sunner's fiscal year ends on September 30. What information should be reported for the note payable in the annual financial statements? What disclosure is required? Why is this important?

Answer 1

Que:

1.What information should be reported for the note payable in the annual financial statements?

Ans:

According to GASB 38, paragraph 12, agencies must report details about short-term debt activity during the fiscal year, even if no short-term debt is outstanding at fiscal year-end. Short-term debt results from borrowings characterized by anticipation notes, use of lines of credit and similar loans. Details include: A schedule of changes in short-term debt disclosing: Beginning balances Increases Decreases Ending balances The purpose for which the short-term debt was issued.

Que:

2.What disclosure is required?

Ans:

Should be disclosed as short term Liability and should must demonstrate an ability to consummate the refinancing

Que:

2.Why is this important?

Ans:

It is Important and mandatory as per repctive laws. This is important because as based on financial statement

only stakeholders(Investors) will invest in the company so financial statement should be true and fair enough for

their stakeholders.