{"id":2767,"date":"2021-07-13T08:46:00","date_gmt":"2021-07-13T13:46:00","guid":{"rendered":"https:\/\/finallylearn.com\/?p=2767"},"modified":"2023-08-19T14:25:12","modified_gmt":"2023-08-19T19:25:12","slug":"liability","status":"publish","type":"post","link":"https:\/\/finallylearn.com\/liability\/","title":{"rendered":"Liability"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69eeed2ae9f8d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69eeed2ae9f8d\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/finallylearn.com\/liability\/#What-is-a-Liability\" >What is a Liability?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/finallylearn.com\/liability\/#Liabilities-on-the-Balance-Sheet\" >Liabilities on the Balance Sheet<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/finallylearn.com\/liability\/#Current-Liabilities\" >Current Liabilities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/finallylearn.com\/liability\/#Long-term-Liabilities\" >Long-term Liabilities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/finallylearn.com\/liability\/#Example-Apple-Liabilities\" >Example: Apple Liabilities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/finallylearn.com\/liability\/#Liabilities-on-the-Accounting-Equation\" >Liabilities on the Accounting Equation<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-is-a-Liability\"><\/span>What is a Liability?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In accounting, a liability is debt owed to company or individual. Liabilities are a claim on a company&#8217;s assets by the creditors. Liabilities require a payment of assets, such as cash, or a performance of a service. A liability occurs from past transaction that requires a future economic payment. <\/p>\n\n\n\n<p>Many liability accounts are called payables. This includes accounts payable, notes payable, and wages payable.<\/p>\n\n\n\n<p>Liabilities are shown on a company&#8217;s balance sheet. They are classified as either current or long-term. <\/p>\n\n\n\n<p>Liabilities are one of the five types of accounts in the accounting system.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>In accounting, the five types of accounts are:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><a href=\"https:\/\/finallylearn.com\/asset\/\">assets<\/a>: resources owned by a business; what the company <strong>owns<\/strong><\/li>\n\n\n\n<li><a href=\"https:\/\/finallylearn.com\/liability\/\">liabilities<\/a>: debts of the company; what the company <strong>owes<\/strong><\/li>\n\n\n\n<li><a href=\"https:\/\/finallylearn.com\/equity\/\">equity<\/a>: claim on the assets by the owners; calculated as equity = assets &#8211; liabilities; equity is the net worth of the company<\/li>\n\n\n\n<li><a href=\"https:\/\/finallylearn.com\/revenue\/\">revenues<\/a>: when a business receives assets from selling products and services<\/li>\n\n\n\n<li><a href=\"https:\/\/finallylearn.com\/expense\/\">expenses<\/a>: when a business uses or consumes assets to create revenues<\/li>\n<\/ol>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Liabilities-on-the-Balance-Sheet\"><\/span>Liabilities on the Balance Sheet<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are two categories of liabilities on the balance sheet:<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li>Current Liabilities<\/li><li>Long-term Liabilities<\/li><\/ol>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Current-Liabilities\"><\/span>Current Liabilities<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Current liabilities are debts that are due within one year. The current liabilities are shown on the balance sheet before long-term liabilities. <\/p>\n\n\n\n<p>Here is a list of typical current liabilities:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>accounts payable<\/li><li>notes payable (1 year or less)<\/li><li>wages payable<\/li><li>salaries payable<\/li><li>income tax payable<\/li><li>interest payable<\/li><li>dividends payable<\/li><li>deferred revenue<\/li><\/ul>\n\n\n\n<p>Current liabilities are paid by using current assets, such as cash, during the year.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Long-term-Liabilities\"><\/span>Long-term Liabilities<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Long-term liabilities are debts that are due in more than one year. These are long-term debts of the company. Examples of long-term liabilities include:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>notes payable (more than 1 year)<\/li><li>bonds payable<\/li><li>mortgage payable<\/li><li>post-employment benefits liability<\/li><li>warranty liability<\/li><\/ul>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Example-Apple-Liabilities\"><\/span>Example: Apple Liabilities<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here is the liability section of the Apple 2020 balance sheet. Apple lists current liabilities and noncurrent liabilities. The current liabilities section shows accounts payable, notes payable and deferred revenue.<\/p>\n\n\n\n<p>The noncurrent liabilities lists notes payable and other long-term debts. The sum of the current and noncurrent liabilities are total liabilities. The total liabilities for Apple in 2020 was $258.5 B.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"249\" src=\"https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/apple-liabilities-2020.png\" alt=\"\" class=\"wp-image-2771\" srcset=\"https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/apple-liabilities-2020.png 600w, https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/apple-liabilities-2020-300x125.png 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/figure><\/div>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Liabilities-on-the-Accounting-Equation\"><\/span>Liabilities on the Accounting Equation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The accounting equation is a basic concept in accounting. The accounting equation is Assets = Liabilities + Equity. This is always true. <\/p>\n\n\n\n<p>The accounting equation is shown on the balance sheet. The balance sheet always must balance because of the accounting equation.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"122\" src=\"https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/accounting-equation-1.jpg\" alt=\"accounting equation\" class=\"wp-image-2812\" srcset=\"https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/accounting-equation-1.jpg 600w, https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/accounting-equation-1-300x61.jpg 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/figure><\/div>\n\n\n\n<p>For Apple in 2020, the total assets were $323.8 B and total liabilities were $258.5 B. So, using the accounting equation, the total equity was $65.3 B.  <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"211\" src=\"https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/Apple-2020-accounting-equation-1.jpg\" alt=\"\" class=\"wp-image-2811\" srcset=\"https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/Apple-2020-accounting-equation-1.jpg 600w, https:\/\/finallylearn.com\/wp-content\/uploads\/2021\/07\/Apple-2020-accounting-equation-1-300x106.jpg 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/figure><\/div>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>For more financial terms, see the <a href=\"https:\/\/finallylearn.com\/financial-terms\/\">Financial Terms Dictionary<\/a>.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n","protected":false},"excerpt":{"rendered":"<p>What is a Liability? In accounting, a liability is debt owed to company or individual. Liabilities are a claim on a company&#8217;s assets by the creditors. Liabilities require a payment of assets, such as cash, or a performance of a service. A liability occurs from past transaction that requires a future economic payment. Many liability [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2770,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[88],"tags":[],"class_list":["post-2767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting"],"blocksy_meta":[],"brizy_media":[],"_links":{"self":[{"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/posts\/2767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/comments?post=2767"}],"version-history":[{"count":1,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/posts\/2767\/revisions"}],"predecessor-version":[{"id":4374,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/posts\/2767\/revisions\/4374"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/media\/2770"}],"wp:attachment":[{"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/media?parent=2767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/categories?post=2767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finallylearn.com\/wp-json\/wp\/v2\/tags?post=2767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}