Liabilities

Definition

Legal obligations of the business, which appear on its Balance Sheet.

What It Means

Liabilities are debt carried by the business and include such items as

  • Accounts payable
  • Loans
  • Deferred revenues
  • Accrued expenses

Those liabilities that must be paid within one year are referred to as current liabilities, the rest are called long-term liabilities. When valuing a small business for sale, you may need to recast its financials, including the liabilities.