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

What are Long-term 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.

As the title of the variable suggests, we are looking in this case for liabilities that are owed in the long-term. This is generally taken in accounting terms to be more than a year. This therefore tends to mean that most trade creditors (except in exceptional circumstances) are not long-term but current liabilities. Long-term liabilities thus tend to be bank loans.

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

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