The Balance Sheet - Notes - Business Accounts - Accounting and Finance - Business Studies

What are Current Liabilities?

A liability is something which a firm owes to a person or another firm. It may be in the form of creditors - people or firms who have sold you goods which you have not yet paid for, or it may be money borrowed from a financial institution - loans or overdrafts.

As the title of the variable suggests, we are looking in this case for liabilities that are owed in the short-term. This is generally taken in accounting terms to be less than a year. Any money that is owed in more than a year's time is considered to be a long-term liability. Short-term liabilities thus tend to be trade creditors and short-term borrowing such as overdrafts.

They are usually shown on the top half of the balance sheet, and are subtracted from the current assets to show net current assets.

Index | Previous | Next