Question

What are the major forms of financing liabilities? Which are long term and which are short term?

Answer 1

Financial Liability :- “A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.”

There are three main forms of financial liabilities:

1. Current liabilities (short-term liabilities) are liabilities that are due and payable within one year.
2. Non-current liabilities (long-term liabilities) are liabilities that are due after a year or more.
3. Contingent liabilities are liabilities that may or may not arise depending on a certain event.

Current liabilities :-

• Accounts payable
• Interest payable
• Income taxes payable
• Bills payable
• Bank account overdrafts
• Accrued expenses
• Short-term loans

Non - Current liabilities

• Bonds payable
• Long-term notes payable
• Deferred tax liabilities
• Mortgage payable
• Capital leas