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Liabilities

Liabilities are items the business owes. Current liabilities are debts that are due within a year. Generally they are payable in cash, but occasionally they are paid in goods or services in a barter arrangement. Notes payable usually represent debts owed to banks or other financial institutions, or to individuals or other companies involving short-term loans. Accounts payable are funds owed for merchandise purchased on open account terms. Accrued wages are wages earned but as yet unpaid to employees. Advance payments involves money already accepted from customers for goods or services as yet undelivered.

Provisions for taxes due are taxes owed within one year but not yet due to the taxing authority. Current maturities on deferred debts are interest payments owed on deferred [long term] debts. Long-term debts [such as mortgage payable] are obligations that are not due within one year, and therefore not classified as current liabilities. Long-term debts may include money borrowed to buy machinery and equipment or to finance building construction, or purchase property and buildings.

Source: "Credit and Collection Manager's Manual" edited by Michael Dennis and Steven Kozack.
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