{"id":134230,"date":"2023-12-05T18:38:05","date_gmt":"2023-12-05T18:38:05","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=definition&p=134230"},"modified":"2023-12-05T18:38:05","modified_gmt":"2023-12-05T18:38:05","slug":"liability","status":"publish","type":"definition","link":"https:\/\/www.techopedia.com\/definition\/liability","title":{"rendered":"Liability"},"content":{"rendered":"

What is a Liability?<\/span><\/h2>\n

A liability refers to a company’s financial obligations that arise from past transactions or events. It is essentially a debt owed by a company to a third party. To settle liabilities, the transfer of company assets, such as cash, should occur in the future.<\/p>\n

Liabilities play a key role in a company’s financial position and are important to consider for financial analysis<\/a> and business valuation purposes.<\/p>\n

By having a clear grasp of the different types of liabilities, their accounting treatment, and associated risks, stakeholders can better evaluate an organization\u2019s financial situation.<\/p>\n

Types of Liabilities<\/span><\/h2>\n

Liabilities are generally categorized on the balance sheet<\/a> as current and non-current liabilities. Here\u2019s a list of the types of obligations that fall into each category.<\/p>\n

Current Liabilities<\/h3>\n

Current liabilities represent financial commitments that are expected to be settled within 12 months or less through the use of current assets or the creation of other current liabilities. Common examples include:<\/p>\n