Meaning and examples
Liabilities show which obligations a company already has toward creditors and other parties. They may require payment of money, delivery of goods or provision of a service. Bank loans, amounts owed to suppliers and customer advances have different economic characteristics, although all may be reported among liabilities.
If a store receives goods with deferred payment, it incurs an amount owed to the supplier. If a customer pays in advance for goods that have not yet been delivered, the store incurs an obligation to fulfil the order. The cash received does not necessarily become revenue immediately: the conditions for revenue recognition matter.
Limits of interpretation
Liabilities are not limited to interest-bearing debt. To assess financial position, consider loans, trade payables and other items separately, along with their due dates. A large debt falling due soon can create problems even for a profitable company if cash inflows are expected later. Related reading: [balance sheet](/guides/balance-sheet/), [revenue recognition](/guides/revenue-recognition/) and [accounts payable](/glossary/kreditorskaya-zadolzhennost/).