Liability

Definition: A liability is a present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow of resources…

A liability is a present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. Liabilities are classified as current (due within one year, such as accounts payable and accrued expenses) or non-current (long-term obligations like bonds payable and long-term loans). In the accounting equation, liabilities represent claims by creditors against the company's assets. Liabilities are increased by credits and decreased by debits.