Spontaneously Generated Funds

Funds generated if a liability account increases spontaneously (automatically) as sales increase.  An increase in a liability account is a source of funds, thus funds have been generated.  Two examples of spontaneous liability accounts are accounts payable and accrued wages.  Note that notes payable, although a current liability account, is not a spontaneous source of funds since an increase in notes payable requires a specific action between the firm and a creditor.
Have more questions? Submit a request


Please sign in to leave a comment.
Powered by Zendesk