Liability is the obligation of the entity which it needs to pay to settle its debts. When the obligations are settled, it results in the outflow of assets of the entity. Liabilities may be short-term and long-term. If liability is required to be settled within 12 months period, it is referred to as a short-term liability. On the other hand, if settlement is needed in more than 12 months period, it is termed as long-term liabilities.
Liability Accounts Example
Here is the list of common liability accounts:
- Unearned revenue
- Notes payable
- Accounts payable
- Interest payable
- Wages payable
- Sales tax payable
- Current portion finance lease obligation
- Non-current portion finance lease obligation
- Loan payable
- Dividend payable