Liabilities

Liabilities are defined as present obligation of entity because of past events. Its settlement is expected to result in an outflow of resources.

Liabilities are classified into two which are current and noncurrent liabilities. Current and noncurrent liabilities are reported separately in the statement of financial position.

Current Liabilities
These are liabilities which are settled within a year or the entity's normal operating cycle, whichever is longer.

Examples of current liabilities: Accounts payable, notes payable, unearned revenues, current portion of long-term debt


Noncurrent Liabilities
These are liabilities which are settled more than one year or beyond the normal operating cycle of the entity.

Examples of noncurrent liabilities: Bonds payable, mortgages payable, long-term notes payable