liability
Definition
An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed. For example, if John hits Jane's car, John is liable for the damages to Jane's vehicle because John is responsible for the damages. In the case of a company, a liability is recorded on the balance sheet and can include accounts payable, taxes, wages, accrued expenses, and deferred revenues. Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period.
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Related Terms
asset-liability management, assumption, contingent liability, cosigner, current liabilities, joint and several liability, limited liability, seller liability, accounting equation, book value, adjusted book value, affordability analysis, balance sheet, equity, matched maturities, net worth, noncurrent liabilities, other long term liabilities, economic risk
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