Liabilities
Liabilities are amounts your business owes to other people or organisations. They arise from past transactions and are settled by paying cash, delivering goods, or providing services. They appear on the balance sheet and reduce your net assets.
In UK accounts, liabilities are grouped by how soon they are expected to be settled. Common items include trade creditors (amounts owed to suppliers), taxes owed to HMRC, wages and expenses due, loans and borrowings, leases, accruals, deferred income and provisions.
How liabilities are classified:
- Current (short‑term): expected to be settled in the near term; for example trade creditors, taxes payable, wages, the short‑term part of loans, accruals and deferred income.
- Non‑current (long‑term): expected to be settled later; for example bank loans, lease liabilities, provisions and deferred tax.
Simple example
You buy stock on credit from a supplier. Until you pay, the amount you owe is a liability to that supplier; if part of a loan is due soon, that part is short‑term and the rest is long‑term.
