What is a Liability?

A Liability is a financial obligation by a person or business to pay for goods or services at a later date than the date of purchase. An example of a liability for a business is Accounts Payable. The obligation may be short-term, paid within a year, or long-term, paid over multiple years. Liabilities have a normal credit balance. Liabilities are listed on the Balance Sheet. Other examples of liabilities include Notes Payable, Mortgage Payable, Salaries Payable, Unearned Rent, and Unearned Revenue.

What are Some Examples of Liabilities?

This table shows a list of common liabilities businesses use to track the amounts owed by the business.

Accounts Payable	Payroll Taxes Payable
Accrued Liabilities	Customer Deposits
Accrued Wages	Unearned Revenue
Wages Payable	Unearned Rent
Salaries Payable	Sales Tax Payable
Interest Payable	Deferred Revenue
Note Payable–short-term	Current Portion of Long-term Debt
Bonds Payable	Mortgage Payable
Note Payable–long-term	Pension Liability

What are the Types of Liabilities?

Liabilities are divided into two broad groups:

• Current Liabilities
• Non-current or Long-term Liabilities

Current Liabilities are considered to be short-term liabilities (less than a year). Non-current liabilities are long-term liabilities expected to be paid over a period longer than one year.

Below are examples of liabilities classified as Current Liabilities (short-term liabilities):

Accounts Payable	Payroll Taxes Payable
Accrued Liabilities	Customer Deposits
Accrued Wages	Unearned Revenue
Wages Payable	Unearned Rent
Salaries Payable	Sales Tax Payable
Interest Payable	Deferred Revenue
Note Payable–short-term	Current Portion of Long-term Debt

Below are examples of liabilities classified as Non-current Liabilities (long-term liabilities):

Bonds Payable	Mortgage Payable
Note Payable–long-term	Pension Liability

What is the Difference Between Current Liabilities and Long-term Liabilities?

A Current Liability is defined as a liability that is one that is expected to be paid within in one year or less (an operating cycle.) For more in depth information about Current Liabilities, watch this video:

https://youtu.be/R2LvB0iduZ4

A Long-term Liability is defined as a liability that is expected to be paid more than one year (multiple operating cycles.)

How are Liabilities Listed on the Balance Sheet

On the Balance Sheet, liabilities are generally listed in order of when payment is due, from shortest term to longest term. For example, Accounts Payable is expected to be paid with about 30 days, a 90-day Note Payable is expected to be paid in 90 days, and a five-year car loan is expected to be paid off over a period of five years. Liabilities are categorized on the Balance Sheet as Current or Long-term Liabilities.

On the Balance Sheet, the liabilities would be listed:

Liabilities

Current Liabilities

Accounts Payable

Note Payable-short term

Long-term Liabilities

Car Loan

Total Liabilities

Here is an example of the liability section of the Balance Sheet from Apple:

Chart of Account Listing for Typical Liability Accounts:

For more about long-term liabilities, check out this article:

What is a Long-term Liability?