{"id":10277,"date":"2023-04-05T13:03:04","date_gmt":"2023-04-05T07:33:04","guid":{"rendered":"https:\/\/www.tickertape.in\/glossary\/?p=10277"},"modified":"2023-04-05T13:04:20","modified_gmt":"2023-04-05T07:34:20","slug":"liability","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/glossary\/liability\/","title":{"rendered":"Liability &#8211; Definition, Working, Types, Examples, Liabilities vs Assets and Expenses"},"content":{"rendered":"\n<p>Companies constantly need funds and, for the same, draw loans or register liabilities. In simpler terms, a liability is a financial obligation that a company commits itself to for growth and various other activities.<\/p>\n\n\n\n<p>Let\u2019s read more about liability, its types, importance and more.&nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_22 counter-hierarchy counter-numeric\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">You will Learn About: <\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" style=\"display: none;\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#What-is-a-liability\" title=\"What is a liability?&nbsp;\">What is a liability?&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#Liability-Quick-Highlights\" title=\"Liability &#8211; Quick Highlights\">Liability &#8211; Quick Highlights<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#How-do-liabilities-work\" title=\"How do liabilities work?\">How do liabilities work?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#Types-of-Liabilities\" title=\"Types of Liabilities&nbsp;\">Types of Liabilities&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#How-are-current-liabilities-different-from-long-term-non-current-ones\" title=\"How are current liabilities different from long-term (non-current) ones?&nbsp;\">How are current liabilities different from long-term (non-current) ones?&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#Example-of-liabilities\" title=\"Example of liabilities&nbsp;\">Example of liabilities&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#Liabilities-vs-assets\" title=\"Liabilities vs assets\">Liabilities vs assets<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#Liabilities-vs-expenses\" title=\"Liabilities vs expenses\">Liabilities vs expenses<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#How-do-liabilities-relate-to-assets-and-equity\" title=\"How do liabilities relate to assets and equity?&nbsp;\">How do liabilities relate to assets and equity?&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#What-is-contingent-liability\" title=\"What is contingent liability?&nbsp;\">What is contingent liability?&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#What-are-examples-of-liabilities-that-individuals-or-households-have\" title=\"What are examples of liabilities that individuals or households have?&nbsp;\">What are examples of liabilities that individuals or households have?&nbsp;<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/glossary\/liability\/#FAQs\" title=\"FAQs\">FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-a-liability\"><\/span><strong>What is a liability?&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"819\" src=\"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/office-worker-suit-tied-by-chain-large-burden-entrepreneur-holding-his-back-huge-weight-debt-tax-fee-financial-crisis-bankruptcy-money-loss-problem-concept-flat-illustration_88138-517.jpg-1024x819.webp\" alt=\"\" class=\"wp-image-10280\" srcset=\"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/office-worker-suit-tied-by-chain-large-burden-entrepreneur-holding-his-back-huge-weight-debt-tax-fee-financial-crisis-bankruptcy-money-loss-problem-concept-flat-illustration_88138-517.jpg-1024x819.webp 1024w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/office-worker-suit-tied-by-chain-large-burden-entrepreneur-holding-his-back-huge-weight-debt-tax-fee-financial-crisis-bankruptcy-money-loss-problem-concept-flat-illustration_88138-517.jpg-300x240.webp 300w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/office-worker-suit-tied-by-chain-large-burden-entrepreneur-holding-his-back-huge-weight-debt-tax-fee-financial-crisis-bankruptcy-money-loss-problem-concept-flat-illustration_88138-517.jpg.webp 1380w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/office-worker-suit-tied-by-chain-large-burden-entrepreneur-holding-his-back-huge-weight-debt-tax-fee-financial-crisis-bankruptcy-money-loss-problem-concept-flat-illustration_88138-517.jpg-300x240@2x.webp 600w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Liability is a financial obligation that an individual or corporation owes. It can be an obligation of money or services to a third party. Liability examples include loans (short-term and long-term), bonds, <a href=\"https:\/\/www.tickertape.in\/glossary\/accounts-payable\/\">accounts payable<\/a>, warranties, and more.&nbsp;<\/p>\n\n\n\n<p>Liabilities, or drawing loans, may be considered a necessary evil and typically come with costs, mostly in the form of interest. However, they should not be viewed from a negative lens. Liabilities can, in fact, help companies meet their day-to-day obligations, aid expansion and accelerate growth. However, if not appropriately handled, they can cause major issues such as a reduction in financial performance or even bankruptcy.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-uagb-advanced-heading uagb-block-d9f911bc\"><h2 class=\"uagb-heading-text\"><span class=\"ez-toc-section\" id=\"Liability-Quick-Highlights\"><\/span><strong>Liability &#8211; Quick Highlights<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2><\/div>\n\n\n\n<ul>\n<li>A liability is an obligation that has to be met or settled by transferring economic benefit in the form of money, goods or services. In accounting terms, liabilities are amounts owed to third parties.<\/li>\n\n\n\n<li>Liabilities are either current or not current depending upon the expectation of their settlement by the company.<\/li>\n\n\n\n<li>Current liabilities are debts due within a year, whereas non-current (long-term) liabilities are debts due over a longer period.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"How-do-liabilities-work\"><\/span><strong>How do <\/strong><strong>liabilities<\/strong><strong> work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A liability is a financial obligation.&nbsp;<\/p>\n\n\n\n<p>Liabilities are a vital component for many firms as they may be required to fund day-to-day operations or aid issues like expansion. Liabilities can be classified as current or not current depending on when they are intended to be settled. It can arise on account of a previous transaction that has not yet been completely settled or can be due to obligations of future services owed by the company.<\/p>\n\n\n\n<p>Use Tickertape to find the liabilities of a company. Open the <a href=\"https:\/\/www.tickertape.in\/screener\/equity?utm_source=glossary&amp;utm_medium=article&amp;utm_campaign=\" target=\"_blank\" rel=\"noreferrer noopener\">Stock Screener<\/a>, click on &#8216;Add Filter&#8217; and select &#8216;Liabilities&#8217;. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"505\" src=\"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/Screenshot-2023-04-05-at-12.58.30-PM-1024x505.png\" alt=\"\" class=\"wp-image-10320\" srcset=\"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/Screenshot-2023-04-05-at-12.58.30-PM-1024x505.png 1024w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/Screenshot-2023-04-05-at-12.58.30-PM-300x148.png 300w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/Screenshot-2023-04-05-at-12.58.30-PM-1536x757.png 1536w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/Screenshot-2023-04-05-at-12.58.30-PM-1024x505@2x.png 2048w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/Screenshot-2023-04-05-at-12.58.30-PM-300x148@2x.png 600w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Types-of-Liabilities\"><\/span><strong>Types of Liabilities&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol>\n<li><strong>Current liabilities&nbsp;<\/strong><\/li>\n<\/ol>\n\n\n\n<p>Current liabilities are those that are payable within a year. Corporates draw such liabilities regularly to fund their day-to-day activities. It is vital to manage these liabilities while keeping in mind the company\u2019s liquidity and financial position. Short-term liquidity can be calculated as a ratio of current assets to current liabilities.&nbsp;<\/p>\n\n\n\n<p>Current liabilities examples include payroll expenses and accounts payable, monthly utilities, wages payable, interest payable, dividends payable, unearned revenues, liabilities of discontinued operations and more.&nbsp;<\/p>\n\n\n\n<ol start=\"2\">\n<li><strong>Non-current (long-term) liabilities<\/strong><\/li>\n<\/ol>\n\n\n\n<p>Non-current liabilities or long-term liabilities are those due after more than a year or are expected to be settled after a year. Analysing long-term liabilities is essential for understanding a company&#8217;s envisioned liquidity and <a href=\"https:\/\/www.tickertape.in\/glossary\/what-is-capital-definition-of-capital-types-and-its-importance\/\">capital<\/a> structure.&nbsp;<\/p>\n\n\n\n<p>Examples of non-current liabilities include bonds payable, long-term debt, etc.&nbsp;<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"How-are-current-liabilities-different-from-long-term-non-current-ones\"><\/span><strong>How are current<\/strong><strong> liabilities<\/strong><strong> different from long-term (non-current) ones?&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Current and non-current are the two forms of financial obligations a company may have. They mainly differ based on the time frame within which they must be repaid.&nbsp;<\/p>\n\n\n\n<p>Current liabilities are those that must be paid within one year, like accounts payable, taxes etc. In contrast, non-current liabilities are those liabilities which are due in more than a year and can include long-term debts, leases and more.&nbsp;<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Example-of-liabilities\"><\/span><strong>Example of <\/strong><strong>liabilities&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Some examples of liabilities are mentioned below:&nbsp;<\/p>\n\n\n\n<p><strong>Current liabilities examples<\/strong><\/p>\n\n\n\n<ul>\n<li>Wages payable&nbsp;<\/li>\n\n\n\n<li>Accounts payable<\/li>\n\n\n\n<li>Dividends payable<\/li>\n\n\n\n<li>Unearned revenues&nbsp;<\/li>\n\n\n\n<li>Income taxes payable&nbsp;<\/li>\n<\/ul>\n\n\n\n<p><strong>Non-current liabilities&nbsp;<\/strong><\/p>\n\n\n\n<ul>\n<li>Bonds payable&nbsp;<\/li>\n\n\n\n<li>Post-employment benefits<\/li>\n\n\n\n<li>Deferred tax obligations&nbsp;<\/li>\n\n\n\n<li>Mortgage Payment\/long-term debt<\/li>\n\n\n\n<li>Warranty liabilities&nbsp;<\/li>\n\n\n\n<li>Capital leases<\/li>\n<\/ul>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Liabilities-vs-assets\"><\/span><strong>Liabilities vs assets<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img decoding=\"async\" loading=\"lazy\" width=\"505\" height=\"270\" src=\"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/image-23.png\" alt=\"\" class=\"wp-image-10281\" srcset=\"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/image-23.png 505w, https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/03\/image-23-300x160.png 300w\" sizes=\"(max-width: 505px) 100vw, 505px\" \/><figcaption class=\"wp-element-caption\">Image source: https:\/\/keydifferences.com\/<\/figcaption><\/figure><\/div>\n\n\n<p>A balance sheet can be divided into two categories \u2013 assets and liabilities.&nbsp;<\/p>\n\n\n\n<p>A company&#8217;s assets are its resources, which hold monetary value and are used to fulfil the financial objectives of a company. Assets create value for an organisation and help generate income. Liabilities, on the other hand, are financial obligations that come with a cost and need to be repaid in a set time frame. This can include the amount owed to third parties, short-term and long-term debts etc.&nbsp;<\/p>\n\n\n\n<p>A company having a large number of assets is a positive sign, whereas high liabilities can be a red flag depicting liquidity risk. In extreme cases, if the liabilities exceed assets, it can force the company into bankruptcy.<\/p>\n\n\n\n<p>The connection between liability and asset can be stated as follows:&nbsp;<\/p>\n\n\n\n<p><strong>Owner&#8217;s Equity = Assets &#8211; Liabilities&nbsp;<\/strong><\/p>\n\n\n\n<p>This accounting equation is expressed as follows:&nbsp;<\/p>\n\n\n\n<p><strong>Assets =Liabilities + Equity&nbsp;<\/strong><\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Liabilities-vs-expenses\"><\/span><strong>Liabilities<\/strong><strong> vs expenses<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Differences&nbsp;<\/strong><\/td><td><strong>Liability&nbsp;<\/strong><\/td><td><strong>Expenses&nbsp;<\/strong><\/td><\/tr><tr><td>Definition&nbsp;<\/td><td>A liability is an obligation or debt that a firm incurs to continue its operations smoothly. There are both long-term and short-term liabilities.&nbsp;<\/td><td>An expense is essentially a cost borne by a firm or money spent in order to generate income from the sale of its goods or services.<\/td><\/tr><tr><td>Timing&nbsp;<\/td><td>One of the characteristics of liabilities is that they must be paid within one accounting year or over several accounting periods.<\/td><td>Because the goal of expenses is to earn revenue for the current period, they must be paid as they are incurred.<\/td><\/tr><tr><td>Income and balance sheet<\/td><td>The balance sheet accounts for its business capital, assets, and liabilities.<\/td><td>The income statements include expenses.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"How-do-liabilities-relate-to-assets-and-equity\"><\/span><strong>How do <\/strong><strong>liabilities <\/strong><strong>relate to assets and equity?&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Accounting formulas are used to determine a company&#8217;s finances in the form of assets, liabilities, and owner&#8217;s equity. It can assist you in determining a company\u2019s true financial position.&nbsp;<\/p>\n\n\n\n<p>The following is the accounting formula for liabilities &#8211;<\/p>\n\n\n\n<p><strong>Liabilities = Assets &#8211; Equity<\/strong><\/p>\n\n\n\n<p>If a company increases its liabilities without increasing its assets, the value of the company can depreciate or experience a fall.&nbsp;<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"What-is-contingent-liability\"><\/span><strong>What is contingent liability?&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A contingent liability arises when an entity foresees expenses as an outcome of an uncertain future event. It may be a prospective loss or liability that may occur in the future due to a specific event. A contingent liability has to be documented if the contingency is likely to happen, and the liability amount may be reasonably calculated.&nbsp;<\/p>\n\n\n\n<p>Lawsuits, policy changes etc., can be apt examples of contingent liability.&nbsp;<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"What-are-examples-of-liabilities-that-individuals-or-households-have\"><\/span><strong>What are examples of liabilities that individuals or households have?&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Just like assets and liabilities are clearly differentiated in a balance sheet, a typical household also can follow the same method. Liabilities for the majority of households will include<\/p>\n\n\n\n<ul>\n<li>Bills due<\/li>\n\n\n\n<li>Payments of home <a href=\"https:\/\/www.tickertape.in\/glossary\/loan-meaning-interest-rates-types-and-repayment\/\">loan<\/a>, rent or mortgage&nbsp;<\/li>\n\n\n\n<li>Interest on loans drawn&nbsp;<\/li>\n\n\n\n<li>Education fee<\/li>\n\n\n\n<li>Miscellaneous expenses&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Liability is a debt or loan drawn by a company, at a cost, repayable in a set time. Assets and liabilities are present in the financial reports generated by companies. To understand businesses and their functionings, you need a thorough understanding of assets and liability.&nbsp; This can help you make sound <a href=\"https:\/\/www.tickertape.in\/glossary\/investment-meaning-types-how-to-invest-and-savings-vs-investments\/\">investment<\/a> decisions and assess a company&#8217;s health.&nbsp;Use <a href=\"https:\/\/www.tickertape.in\/screener\/equity?utm_source=glossary&amp;utm_medium=article&amp;utm_campaign=\" target=\"_blank\" rel=\"noreferrer noopener\">Tickertape Stock Screener<\/a> which helps you find the assets, liabilities and more about a company.  <\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span><strong>FAQs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-uagb-faq uagb-faq__outer-wrap uagb-block-81a0aa0f uagb-faq-icon-row uagb-faq-layout-accordion uagb-faq-expand-first-true uagb-faq-inactive-other-true uagb-faq__wrap uagb-buttons-layout-wrap uagb-faq-equal-height\" data-faqtoggle=\"true\" role=\"tablist\">\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-faq-item uagb-block-572b2105\" role=\"tab\" tabindex=\"0\"><div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M432 256c0 17.69-14.33 32.01-32 32.01H256v144c0 17.69-14.33 31.99-32 31.99s-32-14.3-32-31.99v-144H48c-17.67 0-32-14.32-32-32.01s14.33-31.99 32-31.99H192v-144c0-17.69 14.33-32.01 32-32.01s32 14.32 32 32.01v144h144C417.7 224 432 238.3 432 256z\"><\/path><\/svg><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M400 288h-352c-17.69 0-32-14.32-32-32.01s14.31-31.99 32-31.99h352c17.69 0 32 14.3 32 31.99S417.7 288 400 288z\"><\/path><\/svg><\/span><span class=\"uagb-question\"><strong>What impact does liability have on business?<\/strong><\/span><\/div><p class=\"uagb-faq-content\">Debt (a liability) can be used to purchase additional assets and finance day-to-day operations. But assets may have to be sold to pay off debt if liabilities become too large. This may reduce the company&#8217;s worth.\u00a0<\/p><\/div>\n\n\n\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-faq-item uagb-block-bc014397\" role=\"tab\" tabindex=\"0\"><div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M432 256c0 17.69-14.33 32.01-32 32.01H256v144c0 17.69-14.33 31.99-32 31.99s-32-14.3-32-31.99v-144H48c-17.67 0-32-14.32-32-32.01s14.33-31.99 32-31.99H192v-144c0-17.69 14.33-32.01 32-32.01s32 14.32 32 32.01v144h144C417.7 224 432 238.3 432 256z\"><\/path><\/svg><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M400 288h-352c-17.69 0-32-14.32-32-32.01s14.31-31.99 32-31.99h352c17.69 0 32 14.3 32 31.99S417.7 288 400 288z\"><\/path><\/svg><\/span><span class=\"uagb-question\"><strong>What can be classified as personal liabilities?<\/strong><\/span><\/div><p class=\"uagb-faq-content\">Any kind of home or car loan, student debt, or credit card overdue can classify as personal liability.\u00a0<\/p><\/div>\n\n\n\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-faq-item uagb-block-f6c67397\" role=\"tab\" tabindex=\"0\"><div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M432 256c0 17.69-14.33 32.01-32 32.01H256v144c0 17.69-14.33 31.99-32 31.99s-32-14.3-32-31.99v-144H48c-17.67 0-32-14.32-32-32.01s14.33-31.99 32-31.99H192v-144c0-17.69 14.33-32.01 32-32.01s32 14.32 32 32.01v144h144C417.7 224 432 238.3 432 256z\"><\/path><\/svg><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M400 288h-352c-17.69 0-32-14.32-32-32.01s14.31-31.99 32-31.99h352c17.69 0 32 14.3 32 31.99S417.7 288 400 288z\"><\/path><\/svg><\/span><span class=\"uagb-question\"><strong>Should companies have lesser liabilities than assets?\u00a0<\/strong><\/span><\/div><p class=\"uagb-faq-content\">Ideally, a company should always register higher on assets than liabilities. Higher liabilities indicate that a company is drawing large debts, thereby attracting higher interest costs. In the worse case, failure of repayment can lead to <a href=\"https:\/\/www.tickertape.in\/glossary\/liquidation-meaning-process-types-and-examples\/\">liquidation<\/a>.\u00a0<\/p><\/div>\n\n\n\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-faq-item uagb-block-06b63bde\" role=\"tab\" tabindex=\"0\"><div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M432 256c0 17.69-14.33 32.01-32 32.01H256v144c0 17.69-14.33 31.99-32 31.99s-32-14.3-32-31.99v-144H48c-17.67 0-32-14.32-32-32.01s14.33-31.99 32-31.99H192v-144c0-17.69 14.33-32.01 32-32.01s32 14.32 32 32.01v144h144C417.7 224 432 238.3 432 256z\"><\/path><\/svg><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M400 288h-352c-17.69 0-32-14.32-32-32.01s14.31-31.99 32-31.99h352c17.69 0 32 14.3 32 31.99S417.7 288 400 288z\"><\/path><\/svg><\/span><span class=\"uagb-question\"><strong>Is interest included in liabilities?<\/strong><\/span><\/div><p class=\"uagb-faq-content\">The annual interest payments, also known as accrued interest, are considered current liabilities and are reflected as such in the balance sheet.<\/p><\/div>\n\n\n\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-faq-item uagb-block-ba55b0b5\" role=\"tab\" tabindex=\"0\"><div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M432 256c0 17.69-14.33 32.01-32 32.01H256v144c0 17.69-14.33 31.99-32 31.99s-32-14.3-32-31.99v-144H48c-17.67 0-32-14.32-32-32.01s14.33-31.99 32-31.99H192v-144c0-17.69 14.33-32.01 32-32.01s32 14.32 32 32.01v144h144C417.7 224 432 238.3 432 256z\"><\/path><\/svg><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><svg xmlns=\"https:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 448 512\"><path d=\"M400 288h-352c-17.69 0-32-14.32-32-32.01s14.31-31.99 32-31.99h352c17.69 0 32 14.3 32 31.99S417.7 288 400 288z\"><\/path><\/svg><\/span><span class=\"uagb-question\"><strong>Is deferred tax a liability?<\/strong><\/span><\/div><p class=\"uagb-faq-content\">On a company\u2019s balance sheet, you may find deferred taxes that indicate taxes owned but not paid for. It is recorded as a liability that needs to be paid for in the future and arises due to the difference between when the taxes are due and when they were recorded.\u00a0<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Companies constantly need funds and, for the same, draw loans or register liabilities. In simpler terms, a liability is a financial obligation that a company commits itself to for growth and various other activities.<\/p>\n","protected":false},"author":96,"featured_media":10308,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"spay_email":""},"categories":[1],"tags":[],"jetpack_featured_media_url":"https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6.png","uagb_featured_image_src":{"full":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6.png",2086,1086,false],"thumbnail":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-150x150.png",150,150,true],"medium":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-300x156.png",300,156,true],"medium_large":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6.png",768,400,false],"large":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-1024x533.png",770,401,true],"1536x1536":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-1536x800.png",1536,800,true],"2048x2048":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-2048x1066.png",2048,1066,true],"authorship-box-avatar":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-150x150.png",150,150,true],"authorship-box-related":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-70x70.png",70,70,true],"post-thumbnail":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-270x180.png",270,180,true],"contentberg-main":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-770x515.png",770,515,true],"contentberg-main-full":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-1170x508.png",1170,508,true],"contentberg-slider-stylish":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-900x515.png",900,515,true],"contentberg-slider-carousel":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-370x370.png",370,370,true],"contentberg-slider-grid-b":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-554x466.png",554,466,true],"contentberg-slider-grid-b-sm":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-306x466.png",306,466,true],"contentberg-slider-bold-sm":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-150x150.png",150,150,true],"contentberg-grid":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-370x245.png",370,245,true],"contentberg-list":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-260x200.png",260,200,true],"contentberg-list-b":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-370x305.png",370,305,true],"contentberg-thumb":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-87x67.png",87,67,true],"contentberg-thumb-alt":["https:\/\/www.tickertape.in\/glossary\/wp-content\/uploads\/2023\/04\/6-150x150.png",150,150,true]},"uagb_author_info":{"display_name":"Nikitha","author_link":"%3Fmolongui_byline=true%26mca="},"uagb_comment_info":0,"uagb_excerpt":"Companies constantly need funds and, for the same, draw loans or register liabilities. In simpler terms, a liability is a financial obligation that a company commits itself to for growth and various other activities.","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/posts\/10277"}],"collection":[{"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/users\/96"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/comments?post=10277"}],"version-history":[{"count":6,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/posts\/10277\/revisions"}],"predecessor-version":[{"id":10323,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/posts\/10277\/revisions\/10323"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/media\/10308"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/media?parent=10277"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/categories?post=10277"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/glossary\/wp-json\/wp\/v2\/tags?post=10277"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}