Monday, January 28, 2008

What are Current Liabilities

Definition of Current Liabilities:

Current liabilities include those that will be paid within one operating cycle, which mainly are accounts payable and accrued expenses payable. Also, notes payable and any other liabilities that will be paid within one year from the balance sheet date are included in current liabilities.

The subtotals of current assets and current liabilities appear in a balance sheet so that the reader can compare these two amounts. Dividing current assets by current liabilities gives the current ratio.

They are expected to be paid within one year or the company’s operating cycle, whichever is longer. For example, inventory purchased on credit is often a short term liability. These are expected to be paid quickly in the short term.

Additional Accounting Examples:

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