A list of Current liabilities are the list of obligations of the company which are expected to get paid within the period of one year and includes liabilities such as Accounts payable, short term loans, Interest payable, Bank overdraft and the other current liabilities of the company.
Current Liabilities List
Current liability means the obligations on the company to get paid in a short span of time, it may be within the period of 12 months or within the operating cycle. Current Liabilities gets accrued for a short span of time, which may be even tomorrow or after a month and they highly depend on the liquidity and free cash flow availability with the company.
Below is the list of Current Liabilities –
- Bank Overdraft
- Trade Payables
- Income Received in Advance
- Security Deposits Received
- Liabilities accrued but not paid
- Dividend declared
- Short term loans
- Current Portion of Long Term Debt
- Any liabilities getting accrued in 12 months
Current Liabilities List with Detailed Explanation
Let’s understand the list of current liabilities in detail
#1 – Bank Overdraft
The first in the list of current liabilities is Bank Overdraft. Every entity has its own goodwill and brand image based on which they can get the funds from the financial institutions over and above their bank balance, in order to meet their short term payables. Bank Overdraft is the most common source of funds used by businesses to pay the obligations and then repay the funds by negligible or nil interest.
#2 – Trade Payables
In the operating cycle, business has to give credit to the customer to repay their dues, in the same way, business has to take credit from their suppliers for making payment of the inventory or services received. Creditors turnover and debtor turnover period highly affects the business’s operating efficiency and profitability.
#3 – Income Received in Advance
Many times customers pay to business’s well in advance to ensure the uninterrupted going on. Such advance money ensures the transaction to happen at the predetermined date and will ensure the smooth running of the business. Such advance receipt of the income creates the liability on the business and requires to be disclosed under the current liabilities head.
#4 – Security Deposits Received
The main aim of any business is to do the transaction by safeguarding the interest and assets. In order to mitigate the same, there always exists the need for security which can be used in case of any causalities. So, business persons keep on taking security deposits from the customers based on the risk of getting involved in the transactions. Such deposits for the short term duration will be disclosed under current liabilities.
#5 – Bills
Based on the short term need of the funds, business keeps on taking funds against their future cash inflows. One of such source of funds are the Bills or promissory notes. The person in need of fund will take funds by giving in writing to repay the funds based on the specific fund inflows happening at a specific fund. Such promissory notes will form part under the short term obligations under current liabilities.
#6 – Liabilities accrued but not paid
Facebook’s accrued liabilities are at $441 million and $296 million, respectively.
Obligations keep on accruing based on their maturity dates and businesses have to repay the same. Many times, due to the paucity of the funds or some specific situations, businesses want additional credit period in order to repay the liabilities. Hence such obligations which have been accrued but not able to be met will be considered as current liabilities.
#7 – Dividend declared
Dividend once declared is compulsorily to be paid to the shareholders. Moreover, as per the statutory requirement, declared dividends needed to be paid within the prescribed days. If such dividend is not paid, corporates will be liable to a penalty or specified restrictions which can tarnish the corporate image in the market. Hence, declared dividend will always form part under the current liabilities list.
#8 – Short term loans
Short term fund requirements are a common need for all the business people and it always needed to be fulfilled for the smooth functioning of the business which will act as a lubricant. Such short term fund needs can also be fulfilled by taking loans or borrowings from the financial institutions or banks. Such short term loans will form part of short term obligations.
#9 – Current Portion of Long Term Debt
Current Portion of long-term debt (CPLTD) is a part of the long-term debt due within the next one year
#10 – Any liabilities getting accrued in 12 months
We note from above that Colgate’s accrued income tax was $441 million and $277 million, respectively.
Liabilities will keep on accruing, and businessman will keep on paying the same. On any specific reporting date, all the obligations which are getting due in the next 12 months will be considered as current liabilities for that reporting date. Also, many times the operating cycle may be more than 12 months. So based on the situations and requirements, any obligations will be placed under the current liabilities by applying professional judgments.
Current Liabilities Formula
From the above, we can say that formula is as follows,
Current Liabilities and Current Assets are the most important attributes of any business. Both are highly used in ratio analysis, corporate analysis, and strategic decision making. Hence, one has to be highly judicial while calculating and disclosing the same in financials.
Guide to Current Liabilities List. Here we provide a list of Top 10 Current Liabilities found on the balance sheet along with explanation You can learn more about financing from the following articles –
- Deferred Tax Expense | Formula
- What is Accounts Payable Cycle?
- 7 Examples of Accounts Payable
- Accounts Payable Journal Entries | Examples
- Total Liabilities Calculation Examples
- Deferred Tax Liabilities Calculation
- What is Liabilities Accounting?
- Financial Liabilities Examples
- Accrued Liabilities Meaning