What Does Liabilities Mean

Before answering the question, “What Does Liabilities Mean”, you must consider the concept behind the term Liabilities in order to better understand the meaning of Liabilities.

  

  

What is a Liability 

  

Basically, there are two Sources of Finance to the business, Liabilities and Owner Equity or Equity in case of Company. 

  

Liabilities are the External Sources of Finance For The Businessman or Company, while Equity are the Internal Sources of Finance For the Company or Owner of the business. 

  

So the resources provided to the business by outsiders like Creditors, Banking Institutions, Financial Institutions and other companies are liabilities for the business which the business has to pay in time to smooth running of business and avoid Bad Debts situations. 

  

  

Note: Resources are Assets Owned By The Business 

  

  

  

You may also be interested in Difference Between Liabilities And Owner's Equity 

  

  

  

Liabilities are further divided into two groups: 

  

  

1. Short-Term Obligations or Current Liabilities 

  

2. Long-Term Obligations or Long-Term Liabilities or Long-Term Debts 

  

  

  

So, now, we can say that Liabilities are the amounts due by the business to outsiders (Accounts Payable, Financial Institutions, Banks, etc.).