What Is Liability
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.