CURRENT LIABILITIES Meaning and
Definition
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Current liabilities are a category of financial obligations or debts that are expected to be settled within a short period, usually within one year or the operating cycle of a business, whichever is longer. They are recorded on the balance sheet of a company and represent the organization's debts that are due in the near future.
The most common types of current liabilities include accounts payable, which are amounts owed to suppliers for goods or services purchased on credit; accrued expenses, such as salaries, interest, and taxes that have been incurred but not yet paid; and short-term loans or borrowings that need to be repaid within the current financial year.
Other examples of current liabilities can include customer deposits or prepayments for goods or services that will be delivered in the future, dividends declared but not yet paid to shareholders, and income taxes payable. Current liabilities are an essential element in assessing a company's short-term financial obligations and liquidity.
It is important for businesses and investors to closely monitor current liabilities as they can directly impact the company's working capital and ability to meet its short-term financial commitments. Comparing current liabilities with current assets, such as cash and accounts receivable, helps determine a company's liquidity ratio, which allows for evaluating its ability to cover short-term liabilities.
Common Misspellings for CURRENT LIABILITIES
- xurrent liabilities
- vurrent liabilities
- furrent liabilities
- durrent liabilities
- cyrrent liabilities
- chrrent liabilities
- cjrrent liabilities
- cirrent liabilities
- c8rrent liabilities
- c7rrent liabilities
- cuerent liabilities
- cudrent liabilities
- cufrent liabilities
- cutrent liabilities
- cu5rent liabilities
- cu4rent liabilities
- cureent liabilities
- curdent liabilities
- curfent liabilities
- curtent liabilities
Etymology of CURRENT LIABILITIES
The word "current" in "current liabilities" originated from the Latin word "currere", which means "to run". In this context, "current" implies that these liabilities are expected to be settled or paid within a short period, usually one year.
The term "liabilities" comes from the Latin word "līabilitās", which means "debt" or "obligation". Liabilities refer to the financial obligations or debts that a company owes to other parties.
When the terms "current" and "liabilities" are combined, "current liabilities" refers to the debts or obligations that a company is expected to settle within a short time frame, typically through the use of current assets like cash or accounts payable.
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