What are liabilities in accounting?

Liabilities are any debts your company has, whether it’s bank loans, mortgages, unpaid bills, IOUs, or any other sum of money that you owe someone else. If you’ve promised to pay someone a sum of money in the future and haven’t paid them yet, that’s a liability.

What is the difference between assets and liabilities?

Liabilities refer to things that you owe or have borrowed; assets are things that you own or are owed. A liability (generally speaking) is something that is owed to somebody else. Liability can also mean a legal or regulatory risk or obligation. In accounting, companies book liabilities in opposition to assets.

How to report a company's liabilities on a balance sheet?

A company reports its liabilities on its balance sheet. According to the accounting equation, the total amount of the liabilities must be equal to the difference between the total amount of the assets and the total amount of the equity. Liabilities must be reported according to the accepted accounting principles.

What is a liability in business?

What is a Liability? A liability is an obligation of a company that results in the company’s future sacrifices of economic benefits to other entities or businesses. A liability, like debt, can be an alternative to equity as a source of a company’s financing.