Liabilities
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Liabilities are company obligations
Notes Payable:
- Rights and obligations
- Existence
Check with banks about your company liabilities. Never look for a way to produce fictitious paperwork-proof. Check loans, collateral, and checks for correct amounts. Send confirmations to creditors about your accounts payable, to lenders about notes payable, to customers about customers’ advances, to mortgagor and bondholder about mortgage and bonds payable. Vouch (to make sure that FS are not overstated) and trace (to make sure that FS are not understated) your transactions. From Financial Statements backward to Trial Balance to Sources Documents, and to visual inspection and forwards: from visual inspection to Source Documents, to Journals, to Trial Balances and Financial Statements.
- Disclosure about the notes (completeness)
- Accuracy and valuation (footnote disclosure about the schedule of notes payable and tie the notes to Balance Sheet accounts)
- Classification- short-term or long-term (disclosure understandability)
It is important to remember that you need to use techniques for predicting account balances, based on analytical procedures, for example. Compare ratios from previous years to the current year. Check what the company’s interest expense is to arrive at the company’s total debt. Check accounts that arrive from what your company claims on Financial Statements and then check if what your company claimed makes sense. Keeping financial records in order is critical to any business operations, as well as following the company’s policies and procedures is a good way to stay on track.
