1. Describe some of the accounting requirements for recognizing/accounting for Notes Payable 2. Describe how working...

1. Describe some of the accounting requirements for recognizing/accounting for Notes Payable

2. Describe how working capital, current ratio and quick ratio can be useful in making economic decisions. Who would be making these decisions?

ANSWER MUST BE A MINIMUM OF 250 WORDS

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Expert Solution

Notes payables are such payments which the company is required to make in near future. These are put in the category of current liabilities, as these are required to be paid within a period of 12 months.

Notes payables are recognised whenever the company makes an obligation to make a payment in near future.
Notes payables are considered on accrual basis.

Income income statement containing the notes payables also shows that the company purchases its raw material and other items on credit.

Working capital : for any company working capital of that company decides its ability to pay short term debts.
It is the difference between current assets and current liabilities. Working capital is always considered before making any economic decision.

Current ratio : is considered as the ratio between the current assets and current liabilities. It is also known as liquidity ratio.
Ideal current ratio is considered to be 2 ratio 1. It also helps in deciding whether the company is able to pay current short term liabilities or not.

Quick ratio : it is the ratio used for determining the ability of company to use cash and pay off current liabilities. It is also known as acid test ratio. Ideal quick ratio is 1 ratio 1. It helps in deciding how quickly the company can pay off current liabilities.

ekkarill92 answered 11 months ago

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