Liabilities

RECENT NEWS
Insurance Journal  Mar 27  Comment 
The Hanover Insurance Group, Inc. has launched a new online portal featuring risk management tools for the professional liability industry. HanoverProRisk offers articles, templates, risk bulletins and seminars focused on the needs of agents and...
The Economic Times  Mar 26  Comment 
In cases where tax liability arose because of retrospective amendment to the law or a court ruling, the interest payable on the demand will be waived.
Forbes  Mar 23  Comment 
PwC settles a multibillion-dollar lawsuit over the collapse of MF Global mid-trial, leaving the question of liability unanswered.
New York Times  Mar 23  Comment 
The justices seemed to sharply disagree on the relevance of the Los Angeles County police’s lack of a warrant in the civil suit of a man wounded in a raid.
Insurance Journal  Mar 22  Comment 
Berkshire Hathaway Specialty Insurance (BHSI) introduced its Professional First Professional Liability and Network Security & Privacy Policy and announced it has appointed Geoffrey Kendrick as head of Professional Lines in Canada. BHSI’s new...
Insurance Journal  Mar 22  Comment 
For all the changes in healthcare over the past 10 years, the principal challenges facing medical professional liability (MPL) insurance remain much the same as they have been since its crisis in the mid-2000s: a high level of capital with …
Insurance Journal  Mar 17  Comment 
Widespread use of autonomous vehicles will completely transform the motor insurance sector over the long term when liability begins to shift towards manufacturers and traditional risk pools shrink, according to a report published by Fitch Ratings....
New York Times  Mar 17  Comment 
An administration stacked with former executives would seem to give the firm a lift. But differences over style and substance could make it a burden.
Insurance Journal  Mar 14  Comment 
Lloyd’s and modeling company Arium have launched a tool designed to enable insurers and reinsurers to model liability exposure probabilistically across their entire portfolios, Lloyd’s announced. “The new approach categorizes casualty events...
Forbes  Mar 13  Comment 
Payroll taxes are every bit as important as income taxes, if not more so. Businesses of all sizes fall into the trap of using IRS money for something else. They usually regret it.




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A liability is an accounting term for anything of value a company or an individual owes. Liabilities can include financial liabilities usually debt or fixed goods which have yet to be delivered. Publicly-traded companies are required to list a summary of their assets and liabilities every quarter on their balance sheet, where accounting rules determine how liabilities are categorized and valued. The opposite of a liability is an asset - something of positive value, or something the company owns.

Types of Liabilities

From an accounting perspective, liabilities are divided into two broad categories:

Current Liabilities

Current liabilities are debts or obligations which are due within a year. Current liabilities are reported on the company's balance sheet and include Short-Term Debt, accrued liabilities and Accounts payable.

  • Short-term bank loans: which are a form of short-term debt that the company takes out.
  • Accounts payable: which is money owed to a company, for a good or service. This includes unpaid bills.

By the principle of prudence, current liabilities are reported in the balance sheet at their least favorable valuation.

Long-Term Liabilities

Long-term liabilities are liabilities that will not be paid off or are not due within a year. Long-term liabilities are also reported on the company's balance sheet and include items such as long-term bank loans and bonds issued by the company. They are generally subject to interest payments. Examples include: company cars, computers and investment in another company.

References

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