6.18What are liabilities?
1What is it?
Liabilities are what the company owes others: loans, bonds, bills to suppliers, salaries due, taxes due.
2Why does it exist?
They are claims on the company’s assets that must be paid before shareholders get anything.
3Stock market example
Current liabilities are due within a year; non-current later (long-term loans).
4Quick revision
- Liabilities = what is owed.
- Paid before shareholders.
- Current vs non-current.
5Knowledge check
Q1. Is a 5-year bank loan current or non-current?Show answer
Non-current (except the portion due this year).
Q2. Who is paid first in liquidation: lenders or shareholders?Show answer
Lenders.
Q3. Name a current liability.Show answer
Supplier bills, short-term loans, salaries due.