A liability is an obligation or something which is owesd but not yet settled. Liabilities are legally binding obligations which are settled once a payment is made or through transfer of something of economic value or goods or services. A business liability can include loans, accounts payable, mortgages, bills payable, bank overdraft, bonds, short term loans and accrued expenses etc. Liabilities are recorded on the right side of the balance sheet.
What are the different types of liabilities?
Liabilities are categorised as
1. Current liabilities which are also termed as short-term liabilities or which can be closed/settled within 12 months. Example: bills payable, outstanding expenses
2. Long term liabilities which can be settled after 12 months. Example: debentures, mortgage loans
