- Liability is a financial obligation that is to be repaid or
paid off in near coming period.
- Liability is that amount that a firm/corporation/individual is
legally obliged to pay off in coming period.
- For example, if a corporation purchased inventory on account,
that is, it did not make cash payment, the amount of purchase that
was not paid becomes a ‘liability’ for that corporation (recorded
as Accounts payable].
- Other examples of Liability Accounts are:
Interest Payable, Notes Payable, Bonds
Payable, Long Term Loans