A liability is a financial obligation. Loans, debts, wages and bonds payable are usually part of a business’s liability. It is usually legally binding and it can be decreased by paying off the loan and will be increased if more is borrowed. Usually shown on the balance sheet, a liability can be classified as either current or long-term.
For example…
When visiting his balance sheet, Guy from Guy’s Music Shop realised that his long term liability, the mortgage on his shop is worth double his current liability at one hundred and fifty thousand dollars. While only one item was listed under his long term liability, his short term liability included items like wages payable and accounts payable.
