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.
See also: List of Key Accounting Terms and Definitions at InvestorGuide.com.
Use liability in a sentence
“ When our company tried to merge with our competitor, we knew they had a large liability on their balance sheet from asbestos the company manufactured decades ago. ”
“ I realized that I would have the liability in the incident and would have to pay for the damages that had happened. ”