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Liabilities

  • Liabilities are obligations or debts that an enterprise has to pay at some time in the future.
  • They represent creditors’ claims on the firm’s assets.
  • Both small and big businesses find it necessary to borrow money at one time or the other, and to purchase goods on credit.
  • Super Bazar, for example, purchases goods for Rs. 10,000 on credit for a month from Fast Food Products on March 25, 2005. If the balance sheet of Super Bazaar is prepared as at March 31, 2005, Fast Food Products will be shown as creditors on the liabilities side of the balance sheet. If Super Bazaar takes a loan for a period of three years from Delhi State Co-operative Bank, this will also be shown as a liability in the balance sheet of Super Bazaar.
  • Liabilities are classified as current and non-current

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