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Chapter 5. Position > Examining Liabilities and Owner’s Equity

Examining Liabilities and Owner’s Equity

Now turn your attention to the other half of the balance sheet, the half that describes liabilities and owner’s equity. Just as we did with assets, we will examine the proportion of each type of item under liabilities and owner’s equity so that you can see how you can communicate your value in helping your organization maintain its optimum balance or financial position.

Accounts Payable

On the liabilities and owner’s equity half of the balance sheet (figure 5-1), you can see that accounts payable and accrued expenses are the current liabilities. Accounts payable consists of purchases required for ABC to manufacture its goods, create its inventory, and run its daily operations. Accrued expenses consist of expenses such as property taxes that accrue every day that an organization owns a piece of property, but which will be paid on a specified future date. Pay due to employees can also accrue each day but will be paid only at specified times during a month.


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