LIABILITIES Meaning and
Definition
-
Liabilities refer to the financial obligations or debts that an individual or organization owes to others. They represent the claims or potential claims against assets, arising from past transactions or events. Liabilities can be created through various means, including loans, borrowings, trade payables, or legal obligations.
In accounting, liabilities are classified as current or long-term, depending on their expected repayment timeframe. Current liabilities, also known as short-term liabilities, are those that are due within a year. Examples include accounts payable, accrued expenses, and short-term borrowings. Long-term liabilities, on the other hand, are obligations that are not expected to be settled within a year. These typically include long-term borrowings, bonds payable, and pension liabilities.
Liabilities are crucial elements in assessing an entity's financial health and solvency. They provide insights into the entity's ability to meet its financial obligations and repay its debts. Creditors and investors often examine the liabilities section of financial statements to evaluate an entity's risk and evaluate its financial stability.
It is important to note that liabilities are shown on the balance sheet and are usually reported together with assets. The difference between an entity's total assets and total liabilities represents its net worth or equity. Therefore, liabilities are a fundamental component in determining an entity's overall financial position.
-
Debts; limited liability, obligation or responsibility only to a certain limited extent-a term applied to a joint-stock company enrolled under the provisions of an Act of Parliament, whose partners or shareholders are each only liable for the debts of the company to the extent of the amount of their shares, as distinguished from a company whose partners are responsible for its debts to the full extent of their private fortunes.
Etymological and pronouncing dictionary of the English language. By Stormonth, James, Phelp, P. H. Published 1874.
Top Common Misspellings for LIABILITIES *
* The statistics data for these misspellings percentages are collected from over 15,411,110 spell check sessions on www.spellchecker.net from Jan 2010 - Jun 2012.
Other Common Misspellings for LIABILITIES
Etymology of LIABILITIES
The word "liabilities" is derived from the Old French word "liabilité" which meant "bounden duty" or "obligation". It is formed by adding the suffix "-ity" to the root word "liable", which comes from the Latin word "liabilis" meaning "subject to legal action" or "exposed to". Ultimately, the Latin word traces back to the Latin verb "ligare" meaning "to bind". Therefore, the etymology of "liabilities" suggests a sense of being bound or obligated, especially with legal or financial implications.
Similar spelling words for LIABILITIES
Infographic
Add the infographic to your website:
