Current Liabilities

Posted in Finance, Accounting and Economics Terms, Total Reads: 1043

Definition: Current Liabilities

These are the present obligations of the firm which are to be settled within a year. These obligations are settled by current assets. The liabilities of balance sheet are basically divided into 2 types- Long term/Fixed Liabilities and Current Liabilities.

But even if a liability is long term initially it becomes a current liability when there’s less than year for repayment. The overall picture of current liabilities with current assets helps to analyze the financial health of the firm.

Current Liabilities include:

  • Accounts payable
  • Short term notes payable
  • Accrued taxes
  • Other accrued expenses
  • Current maturities of long term debt etc.

Current Assets (-) Current Liabilities gives us the “NET WORKING CAPITAL” of the firm which essentially shows the liquidity position.

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