Current Liabilities

Current Liabilities refer to a company’s short-term financial obligations that are expected to be settled within one year or one operating cycle, whichever is longer. These liabilities are crucial for assessing a company’s Liquidity and short-term financial health.

• Accounts Payable: Money owed to suppliers for goods and services received.
• Short-term Debt: Loans and borrowings that are due within a year.
• Accrued Liabilities: Expenses that have been incurred but not yet paid, such as wages and utilities.
• Unearned Revenue: Payments received in advance for services or products to be delivered in the future.
• Current Portion of Long-term Debt: The part of long-term debt that is due within the next year.

For example, if a company has $50,000 in accounts payable, $20,000 in short-term loans, and $10,000 in accrued wages, its total current liabilities would be $80,000.

In a case where a business has $200,000 in current Assets and $80,000 in current liabilities, it would have a Current Ratio of 2.5, indicating a healthy Liquidity position.