What is Liabilities in Accounting and Its Types

What is Liabilities in Accounting

In this topic, students will learn what is liabilities in accounting, besides our students also explore about the revenue and expenses in accounting subject.

Formal Definition of Liabilities

Claims by creditors to the property (assets) of a business until they are paid.

Informal Definition of Liabilities

Other’s claim to the business’s good stuff. Amounts the business owes to others.

Additional Explanation of Liabilities

Usually, one of a business’s biggest liabilities (hopefully they are not past due) is to suppliers where a business has bought goods and services and charged them. This is like us going out and buying a TV and charging it on our credit card. Our credit card bill is a liability. Another example of goods personal is a home mortgage. Very few people own their own home. The bank has a claims in contradiction of home which is known as mortgage. This personal liability is another example of mortgage. Some examples of business liabilities are accounts payable. Notes payable, and mortgages payable.

You May Also Read: What is Assets and Its Types in Accounting

What are Types of Liabilities in Accounting

• Account Payable
• Notes Payable
• Mortgage Payable

Accounts Payable 

Claims of creditors against the property of business which arise from the purchase of businesses goods and services on account.

Notes Payable

It is a formal written promises to pay certain sums of money due at time.

Mortgage Payable

It is also a notes payable which is secured by a lien on buildings, land, equipment, and any property of the borrower such as your company.

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