Liabilities

Liabilities are debts of a corporation.  Nearly all businesses have liabilities; even the most successful and profitable of companies will make purchases on credit.  Most companies also find it desirable to borrow money as a means of expanding operations more rapidly.  The borrowed money can be used to purchase new machinery, or extra merchandise, which can be used to produce additional items to be sold to customers.

Typical liabilities of a company include:

• Long Term Debt
• Notes Payable
• Accounts Payable

The calculation of liabilities is as follows:

Liabilities = Assets - Owner's Equity

The statement of liabilities of a company can be found on the Balance Sheet.  Traditionally, notes payable are listed first in the liabilities section of the balance sheet.