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Balance Sheet Balance Sheet: Current Liabilities or Short Term Liabilities
Balance Sheet Balance Sheet: Current Liabilities or Short Term Liabilities
Liabilities are mentioned on the left-hand side of a Balance Sheet below Equity
Capital. Just like assets, liabilities are also represented in a sequence in the Balance
Sheet. Liabilities are grouped and classified according to their nature and time
period. Some common types of liabilities include current liabilities, long-term
liabilities and contingent liabilities. Let us have a look at them:
Liabilities which are normally due and payable within one year are grouped
as current liabilities. These liabilities are also known as short-term liabilities as they
become due within a shorter period (say within 1 year). Creditors, salaries and
wages payable, gratuity or bonus payable, interest payable, bills payable, sundry
creditors, bank overdraft or cash credit, unclaimed dividends, pre-received incomes,
sales tax payable, income tax payable, provisions, other taxes payable, accrued
expenses, instalments due within 1 year for term loans, etc. are all examples of
current liabilities.
Liabilities which are not immediately due but become due after a year or more are
classified as long-term liabilities. Long term bank loans like term loans, debentures,
deferred tax liabilities, mortgage liabilities (payable after 1 year), lease payments
examples of long-term liabilities. Interest payable is also treated as the long-term
liability if interest is payable on maturity.
Contingent Liabilities