Thursday, October 20, 2011

Different Types of Accounting Liabilities

Accountants will most likely encounter these different types of liabilities when they work for companies. All these types will fall under the general heading of "Liability" and the accounting balance sheet and must be properly categorized.

Fixed liability:  This type of liability is required to be paid of at the time of dissolution of a company is called fixed liability. The biggest examples are paid in capital, reserve and surplus.

Long-term liability:  Basically, the easiest way to categorize the are they are not payable within the next accounting period. Examples of long-term liabilities are Debentures of a company, Mortgage Loan, bonds issued, and other financing for extended periods

Current liability:  This is the most common type of liability that an accountant will encounter.  A current liability  is to be paid of in the next accounting period. Some common examples: payroll, short term creditors, bills payable, bank overdraft, telephone and internet bills.

Trade liability:  Liability which is incurred for goods and services supplied or expenses incurred is called trade liability. Examples are payments to suppliers.

Financial liability:  Liability which is incurred for financial purposes is called financial liability. Examples of financial liabilities include Bank overdraft, short term loan, interest expense.

Contingent liability:  A contingent liability is one which is not an actual liability.  but which will possible become an actual liability because of some uncertain event in the future. Some examples of contingent liabilities include receivables discounted before maturity, liability of a lawsuit that has not been resolved.

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