WallStreetMojo

WallStreetMojo

WallStreetMojo

MENUMENU
  • Blog
  • Free Video Tutorials
  • Courses
  • All In One Bundle
  • Login
Home » Accounting Tutorials » Liabilities Tutorials » Current Liabilities Formula

Current Liabilities Formula

By Madhuri ThakurMadhuri Thakur | Reviewed By Dheeraj VaidyaDheeraj Vaidya, CFA, FRM

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 liabilities 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.

Current Liabilities Formula1

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 payable, accounts payable, accrued expenses, unearned revenue, current portion of long term debt, 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.

You can download this Current Liabilities Formula Excel Template here – Current Liabilities Formula Excel Template

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.

CurrentLiabilitiesEg1

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

Popular Course in this category
Sale
All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)
4.9 (1,067 ratings)
250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion
View Course

Current Liabilities Eg 1-1-1

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

Current Liabilities will be –

CurrentLiabilitiesEg1-2

  • 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 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.

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.

CurrentLiabilitiesEg2

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

Current Liabilities Eg 2 - 2

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

Current Liabilities will be –

CurrentLiabilitiesEg .2-2

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.

CurrentLiabilitiesEg3

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

Current Liabilities Eg3-2

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

Current Liabilities will be –

CurrentLiabilitiesEg3-2

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 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. 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 assets 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.

Recommended Articles

This article has been a guide to Current Liabilities Formula. Here we discuss how to calculate Current Liabilities with examples and downloadable excel template. You can learn more about financing from the following articles –

  • Examples of Liabilities
  • Deferred Tax Liabilities Examples
  • Financial Liabilities Types
  • What are Long-Term Liabilities?
0 Shares
Share
Tweet
Share
Primary Sidebar
Footer
COMPANY
About
Reviews
Contact
Privacy
Terms of Service
RESOURCES
Blog
Free Courses
Free Tutorials
Investment Banking Tutorials
Financial Modeling Tutorials
Excel Tutorials
Accounting Tutorials
Financial Statement Analysis
COURSES
All Courses
Financial Analyst All in One Course
Investment Banking Course
Financial Modeling Course
Private Equity Course
Venture Capital Course
Excel All in One Course

Copyright © 2021. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.
Return to top

WallStreetMojo

Download Coursera IPO Financial Model

By continuing above step, you agree to our Terms of Use and Privacy Policy.
WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Book Your One Instructor : One Learner Free Class
Let’s Get Started
Please select the batch
Saturday - Sunday 9 am IST to 5 pm IST
Saturday - Sunday 9 am IST to 5 pm IST

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

Login

Forgot Password?

WallStreetMojo

Free Accounting Course

You will Learn Basics of Accounting in Just 1 Hour, Guaranteed!

* Please provide your correct email id. Login details for this Free course will be emailed to you

WallStreetMojo

Download Current Liabilities Formula Excel Template

Coursera IPO Financial Model & Valuation Free Download