Okuzeka
Accounting & Tax vocabulary · Assets, Liabilities & Equity

Liability

Meaning in accounting & tax, with examples

/ˌlaɪəˈbɪləti/nounCore term

In accounting & tax, liability means: An amount a business owes to others, such as suppliers, banks, employees or the tax office, which it will have to settle in the future.

In Turkish: yükümlülük, borç, yabancı kaynak

How it is used

Liabilities are shown on the balance sheet as current (due within a year) or non-current. Companies incur, recognise and settle liabilities.

Example sentences

  1. Unpaid salaries at year-end are a liability, even if we pay them on 2 January.

  2. The company's liabilities now exceed its assets.

Common collocations

  • current liabilities
  • long-term liabilities
  • settle a liability
  • contingent liability
  • assetSomething a business owns or controls that is expected to bring future economic benefit, such as cash, receivables, stock, machinery or software.
  • equityThe owners' share in a business: what remains when all liabilities are subtracted from the assets. It includes paid-in capital and retained earnings.
  • current liabilityA debt or obligation that a company must pay within one year, such as supplier invoices, short-term loans, taxes payable and unpaid salaries.
  • accounts payableMoney a company owes to its suppliers for goods or services bought on credit, and also the team that processes and pays those supplier invoices.
  • provisionA liability recorded for an expected future cost whose exact amount or timing is uncertain, such as a lawsuit, warranty claims or restructuring.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Assets, Liabilities & Equity

Practise with graded reading

Reading at the right level is the fastest way to make new words stick. Pick free English books by level:

This page explains English vocabulary for learners. It is not financial advice.