Types of Liabilities on Balance Sheet

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

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 one year, and 2) non-current liabilities that are payable after one year.

Types of Liabilities on Balance Sheet

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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 defined as a debt instrument in which the issuer of the note promises to pay a specified amount to a party on a particular date.read more 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.

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#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 on deposit or debenture issued by the companyDebenture Issued By The CompanyDebentures refer to long-term debt instruments issued by a government or corporation to meet its financial requirements. In return, investors are compensated with an interest income for being a creditor to the issuer.read more for financing the capital. For a capital financing company, issue debentures from the general public or accept deposits from the general public, which 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.

#6 – Debenture/Bonds

Company issue bondsCompany Issue BondsBonds refer to the debt instruments issued by governments or corporations to acquire investors’ funds for a certain period.read more or debentures to raise the capital for 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 assets 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 the company having debtorDebtorA debtor is a borrower who is liable to pay a certain sum to a credit supplier such as a bank, credit card company or goods supplier. The borrower could be an individual like a home loan seeker or a corporate body borrowing funds for business expansion. read more of Rs 70000. From the above information, prepare the balance sheet.

Balance Sheet Liabilities Eg1

Below is given data for the 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, which means that the company has enough assets to pay off its long-term and short-term liability.

Example#2

Havells India is in the business of lights. Havells has the following assets and liabilities.

Below is given data for the 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 enough assets to pay 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 the 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 liabilities recorded on the balance sheet, along with practical examples. You can learn more about financing from the following articles –

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