Other current liabilities

Other Current Liabilities

Other current liabilities refer to liabilities,which have to be paid within one year,which are not found to be part of the trade payables,interest payables,employee related payables,and other specific current liabilities. The key categories of other current liabilities include:

(1) Deferred revenue/ unearned revenue:

These liabilities arise when a customer pays upfront for a product/service and cash is received before the obligation is performed. This liability is then recognized over the period the obligation is served. Examples of deferred revenue include membership fees, prepaid software maintenance, etc.

(2) Accrued expenses:

This account includes unpaid expenses that the company has incurred over the period due to items and services purchased in the ordinary course of business. Examples of accrued expenses include salaries and wages, utility bills, rents, insurance premiums and so on.

(3) Taxes payable:

This account includes amounts that the company may owe to relevant tax authorities as a result of the financial statements and other year-end related activities. Examples of taxes payable include the provisional taxes,the corporate tax,VKST,CST,wealth tax,professional tax,etc.

(4) Dividends payable:

This account includes the declared dividends that the company has to pay its equity shareholders. Usually, companies declare and allot the dividend to the sharehoids after the approval of the board of director and the shareholders.

(5) Employee benefits:

This account includes liabilities of the company in connection with the benefits provided to its employees in accordance with the contract of employment or any other agreement with the employees. For example,pension contributions,contributions to the provident fund,and gratuity payables.

(6) Bad debt reserve:

This account includes the allowance for the part of debtors which is not expected to be collected. This allowance is estimated by the area of trade receivables. The balance in this account is shown as deduction from the trade receivables.

(7) Other odds and ends:

This account includes miscellaneous liabilities of the company which may include legal costs, rent deposits, contingent liabilities,etc. These types of liabilities are not in the nature of trading liabilities or interest payable liabilities or employee-related liabilities and therefore should go into the other current liabilities category.

Other current liabilities play an important role in understanding the financial health of a company and help in judging the ability of that company to meet its current obligations easily. A company with too much other current liabilities may suggest a company in financial distress and hence the need to have proper monitoring and control of such items.

Other Current Liabilities

Other current liabilities are liabilities that arise due to the normal operating activities of businesses, such as accounts payable, estimated taxes payable, and advance payments received. These liabilities are generally expected to be paid within one year, and they are listed in the current liability section of a companys balance sheet.

Accounts Payable

Accounts payable are debts that a corporation owes to its trade creditors, which usually include suppliers and vendors. These creditors supply goods and services to the company and extend credit, allowing the company to pay the debt at a later date. The accounts payable balance is recorded when an invoice is received and the company is obligated to pay the supplier.

Tax Liabilities

Estimated taxes payable represent the amount of taxes that a company estimates it will owe during the current fiscal period. This amount is based on estimated income for that period.

Advance Payments Received

Advance payments received are funds that are received in advance of providing a service or delivering a product. The company records this liability on the balance sheet as a current liability and records the amount as revenue when the service is performed or the product is shipped.

Other current liabilities represent the total amount owed to creditors by a company. These liabilities may include things like employee vacation pay, interest on debt, interest due on bank loans, unpaid taxes, and accrued expenses. It is important for companies to maintain accurate and up-to-date records of their current liabilities as these obligations will affect the companys financial statements and cash flow.