Definition
Liabilities are the amounts a business owes to others, such as suppliers, lenders and HMRC. They are shown on the balance sheet, split between those due within one year and those due after more than one year.
Two kinds
| Type | Balance sheet heading | Examples |
|---|---|---|
| Current liabilities | Creditors: amounts falling due within one year | Trade creditors, Corporation Tax, VAT and PAYE owed, overdrafts, accruals, a director’s loan account in credit |
| Long-term liabilities | Creditors: amounts falling due after more than one year | Bank loans, hire purchase and other finance repayable in later years |
A provision is a liability whose amount or timing is uncertain, such as deferred tax.
Where they fit
The balance sheet sets assets against liabilities. What is left, the net assets, always equals the capital and reserves: the share capital plus the profits the company has kept.
Read more: Creditors within one year and Creditors after one year.