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Definition of Liability
Definition of Liability
Current and long-term liabilities
Current and long-term liabilities
A current liability is liability that is expected to be paid using current assets (i.e., a obligation to make a payment within one year from the balance sheet date). Everything else is considered long-term.
If a portion of long-term debt is due within one year, that portion of the debt is reported as current and the rest is reported as long-term.
Common current liabilities
Common current liabilities
Accounts payable
Notes payable
Commercial paper
Income tax liability
Dividends payable
Accrued liabilities
Accounts Payable
Accounts Payable
Accounts payable are obligations to suppliers of merchandise or services purchased on open account. Typically, the only formal document associated with an account payable is an invoice received from the supplier.
Trade notes payable
Trade notes payable
Similar to accounts payable, except these current liabilities:
Usually have a formal promissory note,
have a later due date (i.e., not due within 30 days like a normal accounts payable),
typically have interest associated with them.
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