Liabilities are legal obligations payable to a third party. A liability is recorded in the general ledger, in a liability-type account that has a natural credit balance.
A number of examples of liability accounts are presented in the following list, which is split into current and long-term liabilities:
Current Liability Accounts (due in less than one year):
- Accounts payable. Invoiced liabilities due to suppliers.
- Accrued liabilities. Liabilities that have not yet been invoiced by a supplier, but which are owed as of the balance sheet date.
- Accrued wages. Compensation earned but not yet paid as of the balance sheet date.
- Customer deposits. Payments made by customers in advance of the seller completing services or shipping goods to them.
- Current portion of debt payable. Any portion of long-term debt that is due for payment within one year.
- Deferred revenue. A payment by a customer that has not yet been earned by the company.
- Income taxes payable. Income taxes payable to the government.
- Interest payable. Interest accrued on debt that has not yet been invoices by the lender.
- Payroll taxes payable. Taxes payable that result from the completion of a recent payroll transaction.
- Sales taxes payable. Sales taxes charged to customers, which the company must remit to the applicable taxing authority.
- Use taxes payable. Use taxes are essentially sales taxes that are remitted directly to the government having jurisdiction, rather than through a supplier who would otherwise remit the tax.
- Warranty liability. A reserve for any warranty liability associated with sales, for which warranty claims have not yet been received.
Long Term Liability Accounts (due in more than one year):
- Debt. Debt that is due for payment in more than one year.
There are also a small number of contra liability accounts that offset regular liability accounts. These contra accounts have a natural debit balance. One of the few examples of a contra liability account is the discount on bonds payable (or notes payable) account.