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 payable 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 to employees as of the balance sheet date.
- Customer deposits. Payments made by customers in advance of the seller completing services or shipping goods to them. If the goods or services are not provided, the company has an obligation to return the funds.
- 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.