what is liabilities? Definitions and type of liabilities

Liabilities

It refers to an amount owing by a person, ( a debtor) to another (a creditors) payable in money, goods or services. In general liabilities are financial obligations to outside parties arising from events that have already happened.

Eric L. Kohler -  "an amount owing by one person (a creditors), payable in money or in goods and services"

Types of liabilities

These are the following types of liabilities:-

(a) Current liabilities : It refers to those liabilities which fall due for payment in a relatively short period (normally within one year). These are also known as s term liabilities. For example, creditors, bills payable, short term loans, outstanding Expenses etc.

(b) Fixed liabilities  : It refers to long term liabilities which are payable after a long period of one year. These are also known as long term liabilities. For example, long term loans, public deposits, debentures etc.

(c) Contingent liabilities : It refers to amount which may  or may not become payable in future. future events may decide where it is really a liabilities or not. Due to their uncertainty, these are known as contingent liabilities. For example, financial case pending against the business, in the court of law; guarantee undertaken on behalf of others.

The expected value of contingent liabilities is either shown as foot note ( i.e. outside the balance sheet) or in the inner column only or on the liability side of balance sheet. The accounting convention of full disclosure requires the Liability to be treated like this.