Current Liability

Current liabilities are the short-term debts and obligations that must be met soon. They typically include accounts payable to suppliers, wages owed to staff, taxes due, interest payable, unearned revenue, short-term loans and the portion of long-term debt due within the next twelve months.

For example, a business might have accounts payable of 90,000, accrued wages of 20,000, taxes payable of 15,000 and 25,000 of a long-term loan due this year, giving total current liabilities of 150,000.

Comparing current liabilities with current assets is one of the main ways to assess short-term financial health. If current assets are well above current liabilities, the business should be able to pay its upcoming obligations. If current liabilities are larger, the business may struggle to pay its bills without borrowing more or raising cash.

Watching how current liabilities change over time can also be revealing. A sharp rise in amounts owed to suppliers, for example, may mean the business is delaying payments because cash is tight.