Liability Accounts

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Liability accounts usually detail a business’s credit balances such as debts in a general ledger. Liability accounts are divided into two groups: current and noncurrent. Current liabilities concern debts due within a year and noncurrent liabilities concern debts due in more than a year.

An accounts payable account details credit owed to suppliers for products or services which have not been paid for. Invoices are approved and ready for payment, but balances are unpaid.

In an accrued expenses account, expenses are incurred, but paid for in the next accounting period. Included in this account are unpaid bills, unpaid invoices, and unrecorded wages.

A short-term loans payable account details loan amounts due within a year of the date entered in the balance sheet.

A current portion of long-term debt account details portions of long-term debt which must be paid within a year of the date entered in the balance sheet. Debt not due within a year should be reported as a noncurrent liability.

Unearned revenues detail payments received before products or services have been rendered. Liabilities will equal revenues until products or services are delivered.

Mortgage loans payable refers to long-term loans with real estate. This account can be broken into current and noncurrent liabilities: payments due within a year of the balance sheet date is a current liability and payments due in more than a year are noncurrent liabilities. However, because interest is not payable as per the balance sheet, future interest should not be recorded as a liability.

Instalment loans payable refers to loans paid over time, usually in monthly increments. This account can be broken into current and noncurrent liabilities: payments due within a year of the balance sheet date are a current liability and payments due in more than a year are noncurrent liabilities. However, because interest is not payable as per the balance sheet, future interest should not be recorded as a liability.

Bonds payable refers to long-term debt issued to finance new projects or to cover costs. Depending on the length of the bond’s maturity, it could be a current or noncurrent liability. If a bond matures within a year of the balance sheet date, it is a current liability. If a bond is refinanced by issuing new bonds, it is a noncurrent liability.

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