Terms

Liability

Parent term

Liabilities are legally binding obligations that are payable to another person or entity. These are settled over time through the transfer of economic benefits including money, goods, or services that presupposes previous business transactions, sales, events, exchange of services that is expected to provide economic benefit later. The most common liabilities are usually the largest like accounts payable and bonds payable, with forms of liabilities ranging from loans, mortgages, accounts payable, accrued expenses and earned premiums. Liabilities are also part of the basic accounting equation, with it reflecting on a company’s balance sheet. As it can also be viewed as a source of the company’s asset, it can be an alternative to equity as a source of a company’s financing.