Current liabilities are the obligations of the company which are expected to get paid within the period of one year and are calculated by adding the value of Trade Payables, Accrued Expenses, Notes Payable, Short Term Loans, Prepaid Revenues and Current Portion of the Long Term Loans.

## What is the Current Liabilities Formula?

Current liabilitiesCurrent LiabilitiesCurrent Liabilities are the payables which are likely to settled within twelve months of reporting. They're usually salaries payable, expense payable, short term loans etc.read more are those line items of the balance sheet which are liable for the company within a one-year time frame. The calculation for the current liabilities formula is relatively simple. It is a summation of all the current liabilities of the company. The current liabilities of a company are notes payable, accounts payable, accrued expenses, unearned revenue, current portion of long term debt, and other short term debt.

Mathematically, Current Liabilities Formula is represented as,

**Current Liabilities formula = Notes payable + Accounts payable + Accrued expenses + Unearned revenue + Current portion of long term debt + other short term debt.**

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For eg:

Source: Current Liabilities Formula (wallstreetmojo.com)

### Explanation of the Current Liabilities Formula

Current liabilities are those liabilities for which the company is liable within a time frame of one year. It is the amount that is generally concerned for a particular business cycle. Current liabilities items are usually those which are attached to the trading securities of a company.

Some most common line items for current liabilities are notes payableNotes PayableNotes Payable is a promissory note that records the borrower's written promise to the lender for paying up a certain amount, with interest, by a specified date. read more, accounts payableAccounts PayableAccounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period.read more, accrued expenses, unearned revenueUnearned RevenueUnearned revenue is the advance payment received by the firm for goods or services that have yet to be delivered. In other words, it comprises the amount received for the goods delivery that will take place at a future date.read more, current portion of long term debtCurrent Portion Of Long Term DebtCurrent Portion of Long-Term Debt (CPLTD) is payable within the next year from the date of the balance sheet, and are separated from the long-term debt as they are to be paid within next year using the company’s cash flows or by utilizing its current assets.read more, and other short term debt.

**Examples of Current Liabilities Formula (with Excel Template)**

Let’s see some simple to advanced examples of Current Liabilities formula to understand it better.

#### Current Liabilities Formula – Example #1

A simple example of the current liabilities let us consider an arbitrary company. To calculate the total current liabilities of a company A. We need to assume the values for the different line items for that company, the summation of which will give us the total of current liabilities for that company.

Use the following data for the calculation of Current Liabilities Formula.

Now, let us do the calculation of the Current Liabilities formula based on the given information,

- Total Current Liabilities = $150+$210+$50+$100+$55+$50

**Current Liabilities will be –**

- Current Liabilities = $615

The total current liabilities for the company A, in this case, is $615. It implies the company is liable for $615 within one year. It is the amount that is generally concerned for a particular business cycle. Current liabilities items usually are those which are attached to the trading securities of a company.

Current liabilities are always looked upon with respect to the current assets. Current liabilities are used to calculate the current ratioCurrent RatioThe current ratio is a liquidity ratio that measures how efficiently a company can repay it' short-term loans within a year. Current ratio = current assets/current liabilities read more, which is the ratio of current assets and current liabilities. Current is also used in the calculation of working capitalCalculation Of Working CapitalWorking capital is the amount available to a company for day-to-day expenses. It's a measure of a company's liquidity, efficiency, and financial health, and it's calculated using a simple formula: "current assets (accounts receivables, cash, inventories of unfinished goods and raw materials) MINUS current liabilities (accounts payable, debt due in one year)"read more, which is the difference between current assets and current liabilities.

#### Current Liabilities Formula – Example #2

Current liabilities of Reliance Industries. To calculate the total current liabilities of reliance industries, we need the values for the different line items for that company, the summation of which will give us the total of current liabilities for that company. Below is the presentation of different line items of reliance industries for the period March 2018 and total current liability for reliance industries for that period

Use the following data for the calculation of Current Liabilities Formula.

Now, let us do the calculation of the Current Liabilities formula based on the given information,

- Total Current Liabilities=$15,239+$88,675+$85,815+$918

**Current Liabilities will be –**

**Current Liabilities = $190,647**

The total current liabilities for the reliance industries for the period are Rs 190,647 cr. It implies the company is liable for Rs 190,647 cr within one year. It is the amount that is generally concerned for a particular business cycle. Current liabilities items are usually those which are attached to the trading securities of a company. Current liabilities are always looked upon with respect to the current assets. The total current assets for reliance industries for the period are Rs 123,912cr.

Generally, the current asset is higher than the current liability. But in some cases like for reliance industries, if it is opposite, it may signal that the company can negotiate better with the creditors of the company. Current liabilities are used to calculate the current ratio, which is the ratio of current assets and current liabilities. Current is also used in the calculation of working capital, which is the difference between current assets and current liabilities. In the case of reliance industries, the working capital is negative.

#### Current Liabilities Formula – Example #3

Current liabilities of Tata Steel. To calculate the total current liabilities of Tata steel, we need the values for the different line items for that company, the summation of which will give us the total of current liabilities for that company. Below is the presentation of different line items of reliance industries for the period March 2018 and total current liability for reliance industries for that period.

Use the following data for the calculation of Current Liabilities Formula.

Now, let us do the calculation of the Current Liabilities formula based on the given information,

- Total Current Liabilities=$669+$11,242+$12,959+$735

**Current Liabilities will be –**

Current Liabilities = $25,605

The total current liabilities for the Tata Steel for the period are Rs25,607 cr. It implies the company is liable for Rs25,607 cr within one year. It is the amount that is generally concerned for a particular business cycleBusiness CycleThe business cycle refers to the alternating phases of economic growth and decline.read more. Current liabilities items usually are those which are attached to the trading securities of a company.

Current liabilities are always looked upon with respect to the current assets. The total current assets for Tata steel for the period are Rs 34,643. Current is used in the calculation of working capital, which is the difference between current assets and current liabilities. Tata Steel has a positive working capital, which is common.

### Relevance and Uses of Current Liabilities Formula

Current liabilities are always looked upon with respect to the current assets. Current liabilities are used to calculate the current ratio, which is the ratio of current assets and current liabilities. Current liabilities are also used in the calculation of working capital, which is the difference between current assets and current liabilities.

Generally, the current assetsThe Current AssetsCurrent assets refer to those short-term assets which can be efficiently utilized for business operations, sold for immediate cash or liquidated within a year. It comprises inventory, cash, cash equivalents, marketable securities, accounts receivable, etc.read more are higher than those of the current liabilities of a company. It is common to have a current ratio of 1.5 to 2. Working capital is generally positive values; otherwise, it may signify that the company is running with the help of higher short term debt.

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