Liabilities

RECENT NEWS
Wall Street Journal  Aug 26  Comment 
One of the thorniest tasks awaiting a seven-member board charged with cleaning up Puerto Rico’s debt crisis is deciding how to balance a $70 billion debt load with nearly $43 billion in unfunded pension liabilities.
Insurance Journal  Aug 18  Comment 
Can a debt collector accused of crossing the line avoid liability by buying a consumer’s legal claim out from under her? A federal judge in Las Vegas said yes. The case deserves attention because if the U.S. Court of Appeals …
Insurance Journal  Aug 17  Comment 
Endurance Specialty Holdings Ltd. has launched a new series of environmental liability insurance products, offering both primary and excess coverage for single sites or property portfolios. Endurance’s new products include a site environmental...
Insurance Journal  Aug 15  Comment 
Twitter Inc. won a court ruling that it can’t be held responsible for the so-called Islamic State’s use of the social network to spread propaganda that may have led to the death of an American in Amman, Jordan. U.S. law …
Forbes  Aug 10  Comment 
Small businesses struggling with cash flow are happy to get the shot in the arm of client pre-payments. It may be a win-win. It may not.
MarketWatch  Aug 3  Comment 
Bitcoin’s blockchain is often touted as a revolutionary step forward for network security. But Tuesday’s theft of nearly $70 million of customers’ bitcoins from a Hong-Kong-based exchange showed, it can also be a liability.
Insurance Journal  Aug 3  Comment 
National wholesale insurance broker, Founders Professional, has opened a new managing general agency, Founders Specialty, which will focus on developing products primarily in the professional liability space with key insurance partners. Founders...
Insurance Journal  Aug 1  Comment 
Philadelphia Insurance Companies’ (PHLY) has launched a new Cyber Security Liability Endorsement that offers both first and third party protection for numerous classes of business. The Cyber Security Liability Endorsement can be added to most...
Insurance Journal  Jul 29  Comment 
The Wisconsin Supreme Court has put to a rest a case in which an insured alleged breach of faith when the insurance company that wrote his professional liability errors and omissions insurance policy denied coverage due to a policy exclusion....




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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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