What Is Liability

November 10, 2020
Devine Dictionary

In today’s entry of the Devine Dictionary, we are going to discuss liability.

What does a liability look like for your business? We will discuss what that means and what it looks like in the accounting world.

A liability is a monetary amount that is owed by the company to another entity, company, or individual.

Some of these items may include bills, credit cards, loans, etc.

When you look at a balance sheet, you see two different types of liabilities, current and long-term. The difference between current and long-term is the time frame that those payments need to be made. Current liabilities are more short-term items like credit cards and bills that need to be paid. Long-term liabilities are just that, items that are owed over an extended period, like loans.

Liabilities are a key part of the balance sheet and essential when you are trying to better understand the financial well-being of your business. (Learn more about balance sheets)

When you look at the liabilities and assets together, you can have a nice snapshot of how your business is doing.

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Jennifer Devine

I'm an experienced finance professional with more than 20 years of experience. I've held several Controller positions throughout my career, most notably with an internationally respected commercial real estate investment, management, and brokerage firm. In this role, I was responsible for all aspects of accounting across the company's many operational divisions - including internet services, real estate development, property management, and brokerage services. As our company operated in multiple countries and currencies, it was essential to me that all financial reports were accurate and compliant.

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