Liabilities are financial obligations or debts that any business owes to external parties. They represent claims against a company’s assets and must be settled over time through the transfer of economic benefits, such as money, goods or services. Here is a list of common types of liabilities:
Current liabilities:
These are short-term obligations that a company must repay within one year or one operating cycle, whichever is longer.
- Accounts payable: The amount a business owes suppliers for goods or services received.
- Short-term debt: Loans and borrowings that must be repaid within one year.
- Accrued expenses: Expenses that have been incurred but not yet paid, such as salaries or utilities.
- Current portion of long-term debt: The portion of long-term debt that is due within the next 12 months.
- Unearned revenue: Money received before a service is provided or goods are delivered.
Long-term liabilities:
These are obligations that are not due within the next year. Long-term debt: Loans or borrowings that are due after one year.
- Bonds payable: Debt securities issued by a company that are repayable at a future date beyond one year.
- Deferred tax liabilities: Taxes that are determined or due but have not yet been paid.
- Pension liabilities: Future obligations to pay pensions to employees.
- Lease liabilities: Obligations under long-term lease agreements.
Contingent liabilities:
These are potential liabilities that may occur depending on the outcome of a future event, such as a lawsuit or product warranty. They are recorded if the liability is probable and the amount can be reasonably estimated.