Define liability. When is it recognized?
An accounting liability arises when a firm incurs an obligation to make a future sacrifice that, because of a past event or transaction, it has little or no discretion to avoid. All accounting liabilities are obligations, but not all obligations are accounting liabilities. To be an accounting liability, an item must meet both (1) the definition of a liability, and (2) recognition criteria:
Liability Definition
Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of a past event or transaction.
Liability Recognition
The criteria for liability recognition are:
1 . The item represents a present obligation, not a potential future commitment or intent.
2 . The obligation must exist as a result of a past transaction or exchange, called the obligating event.
3 . The obligation must require a probable future economic resource that the firm has little or no discretion to avoid.
4 . The obligation must have a relevant measurement attribute that the firm can quantify with sufficient reliability.
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Provide the journal entry to record the purchase of raw materials. Process costing is used.
Which of the following statements is most likely true of public relations?
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Forward buying results in
A) a stabilized buying pattern. B) small orders during the promotion period followed by very small orders after that. C) small orders during the promotion period followed by large orders after that. D) large orders during the promotion period followed by very small orders after that.
Some computer packages report an adjusted R2 along with the unadjusted R2 . In general, why is the adjusted R2 smaller, and under what conditions will it approach the size of the unadjusted R2?