How To Find Out Total Liabilities

You can calculate Liabilities from Accounting Equation that shows the relationship between Assets, Liabilities and Owner’s Equity and these types of accounts are shown on the Balance Sheet i.e., these accounts are called Permanent Accounts in Accounting.

From the Accounting equation, we get:

Total Assets = Total Liabilities + Owner’s Equity

By simplifying, we get:

Total Liabilities = Total Assets - Owner’s Equity

Example: If Total Assets are Rs. 5000000, Owner's Equity is Rs. 300000, then what are Total Liabilities for the accounting period?

As, we know:

Total Liabilities = Total Assets - Owner’s Equity

By putting the values, we have:

Total Liabilities = 500000 - 300000 = Rs. 200000

 

Total Liabilities are also equal to the sum of Current Liabilities and Non Current Liabilities / Long Term Liabilities.

Like Total Assets, Total Liabilities are also calculated with the help of accounting ratios like Total Liabilities to Total Assets Ratio.