Types of Liabilities on Balance Sheet

Types of Liabilities on the Balance sheet

Here is the list of the type of liabilities on the Balance Sheet

Liabilities are the financial obligation of the company which is legally binding on it to be payable to the other entity, and primarily there are two types of liabilities on the balance sheet 1) current liabilities that are payable within a period of one year, and 2) non-current liabilities that are payable after a period of one year

Types of Liabilities on Balance Sheet

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Source: Types of Liabilities on Balance Sheet (wallstreetmojo.com)

Top 7 Types of Balance Sheet Liabilities

#1 – Notes Payable

Notes Payable

Notes payable is one of the liabilities for a company. Notes payable is the general ledger liability, which records the face value of promissory notesPromissory NotesA promissory note is a negotiable instrument that represents the debtor's or the writer's (the maker's) written consent to pay a promised sum to the creditor (the payee) on a specified date.read more that’s it has issued. The amount of notes payable represents the amount that remains to be paid. It includes two parties. Firstly borrower and issuer. So notes payable is one of the liabilities for the company because they have to pay interest.

#2 – Accounts Payable

Walmart Accounts Payable Balance Sheet

This type of Liability includes the payment due for the services purchased from other organizations on credit, so it is the liability for the company.

#3 – Salaries Payable

The salary which is not paid during the month and the company is liable to pay is called unpaid or outstanding salary, and this also a liability type for the company. It is also called wages payable in case of labor.

#4 – Interest Payable

Interest Payable

Interest payable means the outstanding interest o deposit or debenture issued by the company for financing the capital. For capital financing company issue debenture from the general public or accept deposit from the general public, and it is also one of the liabilities for the company.

#5 – Creditor

The creditor is the person or entity from which the company purchases raw material on credit, so it is also a liability for the company.

#6 – Debenture/Bonds

Company issue bondsCompany Issue BondsA bond is financial instrument that denotes the debt owed by the issuer to the bondholder. Issuer is liable to pay the coupon (an interest) on the same. These are also negotiable and the interest can be paid monthly, quarterly, half-yearly or even annually whichever is agreed mutually.read more or debenture to raise the capital for the purpose of business expansion, so they have to pay interest on those bonds, and they have to pay the full amount at the maturity date.

#7 – Owner Equity

Owners Equity

This type of Liability means the initial capital or investment made by the owner into a business, so it is the liability for the business because business and owner are a separate entity.

Examples

Example#1

The company reports total asset of Rs 120000 at the time of closing of the accounting year, accounts Payable 40000, shareholder equity 60000 and creditor 40000 and supplier 50000 and company having debtorDebtorA debtor is a person or entity that owes money to the other party in a transaction. The receiver is referred to as the creditor, and the payment terms vary for each transaction based on the terms and conditions agreed upon by the parties.read more of Rs 70000. From the above information, prepare the balance sheet.

Balance Sheet Liabilities Eg1

Below is given data for calculation of Balance Sheet Liabilities.

Calculation of Total Liability

Balance Sheet Liabilities Eg1.1

Total Liability = 60000+40000+40000+50000

Total Liability = 190000

Calculation of Total Asset

Balance Sheet Liabilities Eg1.2

Total Asset = 120000+70000

Total Asset = 190000

From the above example, we can see that Total Asset = Total Liability, it means that company having enough asset to pay off its long term and short term liability.

Example#2

Havells India is in the business of lights. Havells having following asset and liability

Below is given data for calculation of Balance Sheet Liabilities.

Balance Sheet Liabilities Eg2

Calculation of Total Liability

Balance Sheet Liabilities Eg2.1

Total Liability = 130000+25000+50000+80000+35000

Total Liability = 320000

Calculation of Total Asset

Balance Sheet Liabilities Eg2.2

Total Asset = 90000+150000+40000+40000

Total Asset = 320000

From the above balance sheet evaluation, we can say that Havells India has a good financial position, and they have enough assets to make payment of current and long term liability. Havells India had invested more in fixed assets.

Example#3

TCS is in the field of IT and a global leader in the field of IT. They have clients across the world, and they provide services all over the world. The following is the information available on TCS. So prepare the balance sheet or financial position report for the financial year-end 2018.

Below is given data for calculation of Balance Sheet Liabilities.

Example 3

Calculation of Total Liability

Example 3.1

Total Liability = 180000+80000+90000+150000+30000+80000

Total Liability=610000

Calculation of Total Asset

Example 3.2

Total Asset = 150000+20000+50000+40000+50000+60000+60000+40000+40000

Total Asset=610000

Recommended Articles

This has been a guide to Types of Balance Sheet Liabilities. Here we look at its definition, classification, and the types of liabilities that are recorded on the balance sheet along with practical examples. You can learn more about financing from the following articles –

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