Liabilities are debts or obligations that a person or company owes to someone else. They are recorded on the right side of the balance sheet and include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses. Liabilities can be categorized as current or non-current depending on their temporality. Examples of liabilities include money owing on a loan, money owing on a mortgage, or an IOU). Liabilities are reported on a balance sheet and are usually divided into two categories:
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Current liabilities: These are obligations whose liquidation is reasonably expected to require the use of current assets, the creation of other current liabilities, or the provision of services within the next year or operating cycle, whichever is longer).
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Long-term liabilities: These liabilities are reasonably expected not to be liquidated within a year).
Liabilities are the opposite of assets, which are what a person or company owns. Assets add value to a company and increase its equity, while liabilities decrease its value and equity.
