Discounts Suppliers often offer discounts to induce early payment.
Discounts If a company purchases $5,000 of supplies with terms of 2/10, n/30 and intends to pay within the discount period, then it generally records the purchase at the net price (in this case, $4,900).
Discounts If the company fails to pay within the discount period and must remit the full $5,000, then the $100 discount not taken becomes interest expense.
Accrued Liabilities Accrued liabilities represent expenses that have been incurred prior to the balance sheet date which have been neither paid nor included with liabilities as of the balance sheet date.
Accrued Liabilities An adjustment, increasing both an expense and a liability, must be made at the balance sheet date.
Accrued Liabilities For many companies, these accrued liabilities include accrued wages and salaries and accrued vacation and sick pay.