Liabilities

A person's financial obligations such as long-term / short-term debt, and other financial obligations to be paid.

In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Liabilities in financial accounting need not be legally enforceable; but can be based on equitable obligations or constructive obligations. An equitable obligation is a duty based on ethical or moral considerations. A constructive obligation is an obligation that can be inferred from a set of facts in a particular situation as opposed to a contractually based obligation. The accounting equation relates assets, liabilities, and owner's equity:The accounting equation is the mathematical structure of the balance sheet. The Australian Accounting Research Foundation defines liabilities as: "future sacrifice of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions and other past events. "Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board (IASB). The following is a quotation from IFRS Framework:A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefitsRegulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU. Liabilities are debts and obligations of the business they represent creditors claim on business assests. Example of Liabilities All kinds of payable 1) Notes payable - a written promise. 2) Accounts Payable - an oral promise. 3) Interests Payable. 4) Sales Payable. Liabilities are reported on a balance sheet and are usually divided into two categories:Liabilities of uncertain value or timing are called provisions - see Provision (accounting). Money deposited with a bank becomes a liability of the bank, because the bank has an obligation to pay the depositor the money deposited; usually on demand. The money deposited is an asset for the depositor; but this asset will not be recorded by the bank because it is not the bank's asset. A debit increases an asset; and a credit decreases an asset. A debit decreases a liability; and credit increases a liability. When a bank receives a deposit it credits a liability account called "deposits" and debits the depositor's bank account for the same amount (the bank's "deposits" account is the sum of all of the amounts credited to all of its customer's individual bank accounts). A deposit received by a bank is credited because the bank's liability to its customer, the depositor, increases. When a bank informs its depositor that it has debited the depositor's bank account, it means that the depositor's bank account has been decreased by the amount debited.