All debts that a business owes. These could be amounts owed to suppliers and lenders, such as unpaid bills or loans. It could also be salaries that have not yet been paid to employees. Liabilities often include the word “payable” in the title in the Chart of Accounts. A liability can also include amounts paid in advance for a good or service that hasn’t been performed yet.

Remember, an asset is what you OWN, a liability is who you OWE, and equity is what is left OVER (when you take revenue minus expenses)

There are Current Liabilities and Long-term Liabilities. Current liabilities must be paid within 12 months of the balance sheet date. You want these to be more than offset by your short-term assets (cash and accounts receivable). If they are, you are in a good position moving forward. Long-term liabilities are due more than 12 months after the balance sheet date. These could include long-term rent, pensions, notes payable, bonds payable, capital leases, deferred revenue, or long-term loans. You also want your long-term liabilities to be more than offset by your short-term and long-term assets.

Push 'em OutExample: Push ‘Em Out Birthing Center owes $150 for a plumbing repair and $500 for the electrical bill, $900 payment on a bank loan, $45,000 for salaries, and $300 to a bulk herb company for a recent purchase. Their (current) liabilities total $55,950.