A liability is defined as a company's legal financial debts or obligations that arise during the course of business operations.
 | | Term of the Day | Words to Know | | |  | | Liability | A liability, in general, is an obligation to, or something that you owe somebody else. Liabilities are defined as a company's legal financial debts or obligations that arise during the course of business operations. They can be limited, or unlimited liability. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, earned premiums, unearned premiums, and accrued expenses.
In general, a liability is an obligation between one party and another not yet completed or paid for. In the world of accounting, a financial liability is also an obligation but is more defined by previous business transactions, events, sales, exchange of assets or services, or anything that would provide economic benefit at a later date. Liabilities are usually considered short term (expected to be concluded in 12 months or less) or long term (12 months or greater). | | Read More » | | Reading the Balance Sheet | | Learn about the components of a company balance sheet - aka the statement of financial position - and how it relates to other financial statements. | | Read More » | | | Current Liabilities | | Look at some common examples of current liabilities a company may owe within a year or less in order to accurately assess a company's stability. | | Read More » | | | SPONSORED BY INVESCO | | The Complete Guide to ETFs | | ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. | | Learn More » | | | Obligation | | An obligation in finance is the responsibility to meet the terms of a contract. If an obligation is not met, the legal system provides recourse. | | Read More » | | | Balance Sheet | | A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time. | | Read More » | | | Accounts Payable | | Accounts payable is an account within the general ledger representing a company's obligation to pay off a short-term debt to its creditors or suppliers. | | Read More » | | | Expense | | An expense is the cost of operations that a company incurs to generate revenue. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
