Long term liabilities

Short-term and long term liabilities

Definition of long-term liabilities

Current liabilities are short term financial obligations which a company has to pay within one year.

There are many kinds of current liabilities:

• Accounts payable
• Notes payable
• Sales taxes payable
• Unearned revenues
• Dividends payable
• Customer deposits
• Other short financial debts

Introduction to current liabilities

• As we know from the basic accounting, current liabilities are the passive side of the balance sheet.
• According to the rule of thumb, current liabilities increase in credit side, on the contrary it will decrease in debit side.
• This accounts are used in order to find several liquidity and efficiency ration such as current ratio, working capital, Acid test ratio.
• That’s why it is important to manage the current liabilities.
• Usually current liabilities must be less than current assets. Because currents liabilities must be settled by current assets.

Current liabilities