May 162007
A liability is a debt that a business or person owes. (A creditor is a liability, because they are owed money)
A current liability is a debt that must be paid within a fairly short period of time. In balance sheet terms, this is generally accepted as a debt that is repayable within a year.
These include things like:
- loans repayable within one year
- a bank overdraft
- trade creditors
- tax
- accrued charges (debts for which the business has not yet received an invoice for)
A long-term liability is any other debt (which is not due within one year). Examples of long-term liabilities would be:
- long term loans
- mortgages
- debentures or debenture loans (securities issued by a limited company at a fixed rate of interest)
