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Liabilities (Accounting) - Explained

What are Liabilities?

Written by Jason Gordon

Updated at April 7th, 2022

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Table of Contents

What is a Liability? Examples of Liabilities

What is a Liability? 

Liabilities are the things that we owe to others relating to loans extensions of credit and other obligations arising from the course of business,

In the accounting equation, assets equals liabilities plus equity.


Back to: Accounting & Taxation

Examples of Liabilities

Some common examples of liabilities found on the balance sheet include:

  • accounts payables, 
  • notes payables,
  • salaries payables,
  • Unearned revenue (you owe goods or services)

As a point of reference, payables are what we're expected to pay,  receivables are what we're expected to receive.  Ask yourself, "what are we expected to do with this cash?" If we're expected to pay it at another date, then it's a payable. If we're expected to receive it, then it's a receivable. 

Unearned revenue is the product or service that we're expected to pay back later on. So, somebody gave us money up front. I still owe you a product or that service. That's what makes it an unearned revenue. Once I provide that good or service, the unearned revenue will convert to earned revenue, an asset. 

Related Topics

  • What are Financial Statements? – Financial Accounting
    • Consolidated Financial Statements
  • What is the Income Statement? – Financial Accounting
    • What are Revenues? – Financial Accounting
    • What are Expenses? – Financial Accounting
  • What is the Statement of Retained Earnings – Financial Accounting
  • What is a Balance Sheet? – Financial Accounting
    • Accounting Equation Definition
    • What are Assets? – Financial Accounting
    • What are Liabilities? – Financial Accounting
    • What is Equity? – Financial Accounting
  • What is the Statement of Cash Flow? – Financial Accounting
  • Analysis and Creating Financial Statement 
liability liabilities

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