Business Dictionary
Liability
Definition
Something a person or company owes, usually a sum of money.
Deep Dive
A liability is an obligation or debt that a person or company owes to another, typically a sum of money, arising from past transactions or events. These are financial responsibilities that require a future outflow of economic benefits from the entity to settle them. Liabilities represent a claim against a company's assets and are a fundamental component of its financial health.
Examples & Use Cases
- 1A company owing money to its suppliers for raw materials and services received (accounts payable).
- 2An outstanding bank loan that a business is required to repay over the next five years.
- 3Salaries and wages owed to employees for work already performed but not yet paid at the end of an accounting period.
Related Terms
DebtAccounts PayableObligationBalance Sheet