Current Liabilities
Obligations due within one year.
Current liabilities include accounts payable, short-term loans, accrued expenses, current portions of long-term debt, and unearned revenue. If they exceed current assets, the business may face a liquidity crisis. Lenders closely examine this relationship through the current ratio and quick ratio before approving credit.
Example
A manufacturer's current liabilities include $18,000 in accounts payable, $12,000 in accrued wages, $5,000 for a loan payment due this year, and $2,000 in sales tax—totaling $37,000.
Why It Matters for Your Business
Current liabilities represent bills coming due soon, and not having enough current assets to cover them can lead to cash shortages or insolvency.
Related Terms
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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