A liability is a debt that a business or person owes.  (A creditor is a liability, because they are owed money)

A current liability is a debt that must be paid within a fairly short period of time.  In balance sheet terms, this is generally accepted as a debt that is repayable within a year.

These include things like:

  • loans repayable within one year
  • a bank overdraft
  • trade creditors
  • tax
  • accrued charges (debts for which the business has not yet received an invoice for)

A long-term liability is any other debt (which is not due within one year).  Examples of long-term liabilities would be:

  • long term loans
  • mortgages
  • debentures or debenture loans (securities issued by a limited company at a fixed rate of interest)

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