Liabilities are the financial obligation of the company as a result of any past events which are legally binding on it to be payable to the other entity, settling of which requires an outflow of the different valuable resources of the company and these are shown in the balance of the company.
What are the Liabilities in Accounting?
Liabilities in Accounting is an account in which the company maintains all its records like such as debts, obligations, payable income taxes, customer deposits, wages payable, expenses occurred. Liability accounts will normally have a credit balance.
- Liability is an obligation, that is legal to pay like debt or the money to pay for the services or the goods utilized. The liabilities are settled over a particular time period.
- Some of the examples of Liabilities are Accounts payable, Expenses payable, Salaries payable, Interest payable. The opposite word of the Liability is an Asset.
- For a bank, accounting liabilities include Savings account, current account, fixed deposit, recurring deposit and any other kinds of deposit made by the customer. As these accounts are like the money to be paid to the customer on the demand of the customer instantly or over a particular period of time. These accounts for an individual are referred to as the Assets.
Top 3 Types Of Liabilities in Accounting
Listed below are the top 3 types of Liabilities in Accounting.
#1 – Current Liabilities Accounting
Current liabilities are the liabilities of a company which are supposed to be paid within twelve months or a year. These are generally called as Short term Liabilities
List of Current Liabilities in Accounting
Here is the list of Current Liabilities Accounting are:
- Accounts payable – These are payables to suppliers respect to the invoices raised when goods or services are utilized by the company.
- Interest payable – The interest amount to be paid to the lenders on the money owned, generally to the banks.
- Accrued Expenses – These are the expense i.e. the salaries which are payable to the employees in the future.
- Dividends – The dividends declared to the shareholders by the company and are yet to be paid to the shareholders.
- Customer deposits – The deposits made by the customer for the utilization of the goods or services.
- Taxes payable –The taxes payable includes many types of taxes like Income tax, Sales Tax, Professional Tax, Payroll taxes payable.
- Bank Account overdrafts – These are the facilities given normally by a bank to their customers to use the excess credit when they don’t have sufficient funds.
- Current Maturities – This is the part of long term debt that is going to mature and due within the next twelve months.
- Bills payable – These bills generally, include like utility bills i.e. Electricity bill, water bill, maintenance bills which are payable.
#2 – Non-Current Liabilities Accounting
Non-Current liabilities are the liabilities of a company which are supposed to be paid or settled in a long term basis generally more than a year. These are generally called as Short term Liabilities.
List of Non-Current Liabilities in Accounting
Here is the list of Non-Current Liabilities Accounting –
- Bonds Payable – This is a liability account that contains the amount owed to bondholders by the issuer.
- Long term Loans – The long term loans are the loans which are taken and to be repaid in the longer period generally more than a year.
- Customer Deposits – The customer which are taken for a very long maturity more than a year, generally a Fixed deposit in a bank or for any longer duration contract.
- Mortgage Payable – This is the liability of the owner to pay the loan for which it has been kept as security and to be payable in the next twelve months.
- Unearned Revenue – unearned revenue arises when the company failed delivered to the goods or services but has taken the money in advance.
- Deferred income taxes – The income taxes that are due for the current period and have been not yet paid.
- Capital Lease – This is a lease agreement made between the owner and the person who wants for the temporary use
#3 – Contingent Liabilities Accounting
source: Facebook SEC Filings
Contingent Liabilities are the liabilities which may or may not occur. These Liabilities may arise due to specific situations and conditions.
List of Contingent Liabilities in Accounting
List of Contingent Liabilities in Accounting –
- Potential Lawsuits- This arises when a person gives a guarantee for another party if the actual party fails to pay the debt in time.
- Product Warranty – when a warranty is given on a product for a certain time and which gets damaged or spoiled that the company is liable to it and need to pay for that.
- Pending Investigations- Any pending investigations by the law, suppose if found defaulter than supposed to pay the penalty.
This has been a guide to Liabilities in Accounting, its definition, and meaning. Here we discuss the top 3 types of Accounting Liabilities including Current, non-current and contingent liabilities along with examples. You can learn more about from the Accounting following articles –
- Types of Liabilities on the Balance Sheet
- Examples of Current Account Formula (with Excel Template)
- Types of Accrued Expenses on Balance Sheet
- Examples of Current Liabilities Formula
- What is Mortgage Formula?
- Accrued Expense Journal Entry
- Write-Off Accounting
- Accounts Payable vs Notes Payable – Comparison
- Financial Liabilities Types
- Interest Expense Calculation