Current Liabilities Definition And Examples

We already familiar with Current Liabilities in our previous articles but here we discuss them in more details and explain them with important examples.

Current Liabilities Definition:

These are the liabilities that are paid out for the current Accounting Period of time or with the total period of one year.

If the Current Liabilities exceed Current Assets then it is not good position for the meeting the daily expenses and amount of Debts in future. It also indicates that Working Capital is not good and company will suffer losses in near future. So Company must improve its resources (Current Assets) to overcome this critical position of the business.

Types of Current Liabilities / Examples of Current Liabilities

Here are most important examples of Current Liabilities.

·  Accounts Payable / Sundry Creditors

From time to time, businesses may purchase goods from suppliers on Credit basis for resale purposes. They are also called Creditors. Accounts Payable sells goods on credit to those companies that can repay their credit amount in time. So, they check their Working Capital through Financial Statements. The suppliers can give discount to these companies on sale.

Accounts Payable includes Trade Accounts and Other Accounts Payable. Trade Accounts Payable give credit during trading or in case of Inventory or merchandise. For Example, getting credit on buying goods or services. Other Accounts Payable may include those persons that can give you Credit other than Inventory or merchandise. For Example, Expenses Payable, Rent Payable, etc.

·      Notes Payable

 What Are Notes Payable?

Notes Payable Definition:

It is Current Liability in writing to pay a certain amount of money in time in a future date. It is also made payable on demand.

Examples include Bank Loans, Purchase of Costly Office Equipment, Purchase of Inventory or merchandise, etc.

·      The Current Portion of Long-Term Debt

It includes short-term borrowings like taking loans from banks for mortgage property. The current portion of loan is the principal amount that is payable on monthly, quarterly, Semi-Annually and Annual Basis. This Current portion is treated as Current Liability.

·      Accrued Liabilities or Outstanding Liabilities / Outstanding Expenses

When expenses are not paid but the benefits are attained for its utilization. Examples include Salaries Payable, Telephone Expenses, Utility Bills, etc.

As we do not make payment for our expenses, so these expenses are also called Accrued Expenses.

·      Payroll Liabilities

An Entrepreneur not only pays salaries, wages to its employees but also pay any benefit provided under the law. Payroll includes wages, salaries and other costs required by law.

Payroll includes:

                                                                                                       Rs.

                   + Salaries + Wages                                  100000

                   + Social Security And Medical Relief       7000             

                   + Federal Taxes                                          5000     

                   + Unemployment Taxes                              3000

                   + Workers Compensations                          2000

                                                                                    ________

                           Total Payroll Costs                             117000

                                                                                     ________

   
 Un-Earned Revenue                            

It is the Revenue which is actually not earned by the entrepreneur but the amount of payment is received from the customer.

In Other words, we can say that the amount received from the customers for the services not actually rendered by the business. In this case, the company receives the fees in advance. Now it is the Current Liability of the company to render the services in the future period of time because it is done within the operating cycle of the business.

So, it is all about Current Liability Definition and its Examples and we can say that it is very necessary for the business to monitor it in order to improve the working capital of the business and ultimately to run the business smoothly.