WHAT ARE LIABILITIES? (EASIEST EXPLANATION) Straight to the Point #STTP #226

In around two minutes you will know what are Liabilities. You will get both professional definition and easy explanation. No intro, no outro, straight to the point.

Liability is something of a value, usually in a form of cash, that an individual or a company owes.

Liabilities are the opposite to Assets, and if you are not sure what are Assets, feel free to watch my previous video.

In very simple terms, if you owe something to someone, whether it is another individual or a corporation, you have a liability.

If you loaned money from your friend, this is your liability.

If you have mortgage, this is your liability to the bank.

If a company pays salaries every two weeks, this is their liability as well.

Usually, liabilities come in form of cash. But sometimes liabilities can be presented in form of another items. If you borrowed a ladder from your friend, technically, this is a liability as well, since you need to return it.

Liabilities can be paid in full or through partial payments. Borrowing small sums of money can be returned all at once. But mortgage payments are usually extended for 30 years. So, for the whole period of time while you still have your mortgage, you have a liability.

Liabilities are a big concept in accounting. Specifically, for a balance sheet. They are recorded on the right side of a balance sheet. Two other components of a balance sheet would be assets and shareholders’ equity.

And in order to calculate the liabilities of a company, you simply need to subtract shareholders’ equity from total assets.

Everything that a company owes will be reflected under liabilities section.

Current liabilities are those that must be paid within one year. And non-current liabilities can be taken care throughout much longer period of time.

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