Liabilities in accounting refer to debts or obligations that a person or company owes to someone else. They are recorded on the right side of the balance sheet and can 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. Current liabilities are debts that must be paid within the next 12 months, while non-current liabilities are debts that are due after 12 months.
Liabilities are a vital aspect of a company because they are used to finance operations and pay for large expansions. They can also make a company less attractive to investors if they are too high. Business owners and members of a companys financial team are responsible for understanding what liabilities their company has and how they affect the company as a whole.
Examples of liabilities include bank loans, overdrafts, outstanding credit card balances, money owed to suppliers, interest payable, rent, wages and taxes owed, and pre-sold goods and services. If a company has an obligation to pay someone or for something, it is a liability.
