Liabilities

Liabilities are simply 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 additional merchandise that 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:

Liabilities = Assets - Owner's Equity

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