Accounting Liability- A Necessary and Must Taken Area of Business
Since the business runs on the two basic dimensions called assets and liabilities, it becomes important to consider the part of accounting liability for any business entities. Such type of liability is defined as an obligation of a business house that comes from the past transactions or events. Here we take all type of borrowing from other persons or banks for the improvement of the business for certain specified time duration. The liability heads incorporate the duty and responsibility to other entities for the future settlement. The liable business cannot avoid the duty or responsibility obligates during the time of entry, and transaction or event obligations are mentioned in the logbook.
In the business accounting, the liabilities are not necessarily enforceable but the obligations are particularly considered from a set of facts in a particular situation. Since the accounting equation is the mathematical structure of the balance sheet, so it is very much expected that both the heads of business will get proper representation. According to the Australian Accounting Research Foundation liabilities can be defined as: “future sacrifice of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions and other past events.”
In this way business liability is something for which can not be confined just loans. In view of finance, accounting and banking, a liability is an assigned monetary value for which business houses are responsible for repayment of the amount anyway.
The accounting liabilities can be classified into two categories, such as-
Current Liabilities- such liabilities are reasonably expected to be quantified within a financial year. They probably include the heads like accounts, wages, taxes, and accounts payables. There is some unearned revenue when adjusting entries and parts of long term bonds in the same year including short-term obligations. The notes Payable-loans taken from banks are meant to be repaid within 30 days. The accrued expenses include the accounting liability of compulsory expenses. Here may be the bills are not received but the balances of each must be maintained.
Long-term Liabilities- these liabilities include long-term bonds, amount payables, pension obligation, long-term leases and other long term product warranties.