Liabilities
What are Liabilities?
Liabilities are financial debts and obligations owed by your business to external third parties, representing funds due for settlement: supplier accounts payable, bank loans, and accrued expenses.
Classification of Liabilities
| Category | Definition | Examples |
|---|---|---|
| Current Liabilities | Obligations due within 1 year | Accounts Payable (Supplier Debts), accrued wages |
| Non-Current Liabilities | Long-term obligations due after 1 year | Long-term bank loans, equipment financing |
The Accounting Equation
Assets = Liabilities + Owner's Equity
Frequently Asked Questions
Yes. Bank loans are debt obligations that must be repaid, reported under Liabilities on your Balance Sheet.
An expense is an operational cost incurred during a period (such as rent). A liability is an unpaid obligation. Unpaid rent becomes an accrued liability until settled.
Yes. Supplier invoices for credit purchases are current liabilities due within the operational cycle.
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