Liabilities

Liabilities are legal financial debts or commitments that occur during the course of business operations.

A few common examples of liabilities are:

  • Accounts payable
  • Accrued expenses
  • Loans
  • Mortgage
  • Income taxes payable
  • Wages & salaries payable

Details of liabilities are recorded within the Balance Sheet

Liabilities can be further categorised and split into short term and long term.

Short term liabilities refer to debts expected to be paid off within a year. Also known as current liabilities

Long term liabilities are expected to be paid over a few years. Also referred to as non-current liabilities

The most well known liability and the one most are aware of is accounts payables.

Accounts payables relates to goods or services purchased on credit that will be due for payment.

Knowing when payments are due is essential to managing business cash flow.

Making payments on time or early will ensure a business is able to be approved for extended or further credit in the future.

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