Running head: WEEKLY REFLECTION 1

Team D Reflection
Dianne Daniels, Vernon Daniels, Shannon Glascock,
Shonda Mooney, Maggie Perez, Maricell White
ACC/422
July 7, 2012
Donald Minyard


























WEEKLY REFLECTION 2
Team Reflection
In this weeks reflection, the team will talk about the objectives for week four and
five. We will discuss the importance of current and long-term liabilities to internal users
such as management and external users such as investors and creditors. In addition,
we will identify the importance of disclose contingencies. Lastly, we will give
explanation(s) to how do operating and capital leases relate to liabilities.
Both current and long-term liabilities allow analysts to have a better
understanding of a companys current liquidity position. According to Kieso, et al,
(2012, p. 722), Current liabilities are obligations whose liquidation is reasonably
expected to require use of existing resources properly classified as current assets, or
the creation of other current liabilities. Long-term liabilities are obligations that a
company does not reasonably expect to liquidate within the normal cycle, but a long-
term liability that matures within the current operating cycle are classified as current
liabilities if payment of the obligation requires the use of current assets (Kieso, et al,
2012).
It is important to disclose contingencies because it gives financial statement
users the opportunity to query their investment or the sustainability of impending
investments based on the probable result. It is relevant to materiality and full disclosure
which is required under the accounting principles. In addition, it explains more about
the financial statements and ma answer some questions that investors may have. The
lack of contingency disclosure leaves prospective investors uninformed of these events
as well as conceivable financial obligations that may affect the value of their holdings.
WEEKLY REFLECTION 3
Leases are accounted for is two different ways an operating lease and a capital
lease. An operating lease transfers the rights to the lessee of the property. At the end of
the lease the lessee will then return the property back to the lessor. Operating leases
are accounted for as ordinary operating expenses; they are not set up as liabilities.
Capital leases, however, are set up and accounted for as long-term liabilities. Though,
both operating and capital lease can potentially become a liability. When in a capital
lease the lessee will assume responsibility for the property and some of the risk
involved and the benefits as well. When the lease is signed it will then be recognized as
an asset and also a liability for the payments on its balance sheet. In capital leases the
expense of the property is recognized sooner than in an operating lease.

Conclusion
Current and long-term liabilities are essential to internal and external users
because it gives them understanding of the companys financial position. For internal
users such as managers, they are important in order to plan, evaluate and control
operations. External users, such as investors and creditors, they are important to
gauge the future profitability and liquidity of a company.






WEEKLY REFLECTION 4




Reference
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2012). Intermediate Accounting (14
th

ed.). Danver, MA: John Wiley & Sons, Inc.