Current Liabilities

Current Liabilities are those debts at the balance sheet date that must be paid either immediately or within one year or operating cycle. Common current liabilities are:

(i)    Creditors (or Accounts Payable):

This liability arises from the purchases of goods on credit or use of services not yet paid (trade creditors) or money borrowed (loan from a bank) for a short period (non-trade creditors). The balance sheet simply shows the aggregate amounts payable to trade or non-trade creditors and not the names of individual creditors.

(ii)    Bills Payable (or Notes Payable):

It is a written promise to pay money to a creditor for the purchase of goods or services used in the business or the money borrowed.

(iii)    Outstanding Liabilities:

They represent liabilities for expenses incurred but not yet paid as on the balance sheet date e.g., outstanding wages, salaries, commission, interest, taxes etc.,

(iv)    Income received in advance (Unearned revenues):

This item of liability is to be found in the balance sheet of firms dealing in the publication of newspaper and magazines.

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