Common Liabilities

Liability Accounts and Their Normal Balances

Liabilities are the unpaid bills owed to other companies
or entities for items purchased. These are owed to
suppliers, banks, bond holders or other companies.
Credit is used to hold a company over until such time as
it can raise the money through sales or services to pay
off its creditors. Liabilities accounts have a normal
balance of a credit (Latin for Right)

Current Liabilities-Title of a heading-is any money owed to creditors which must be
paid within a 12 month period of time or a complete fiscal cycle whichever is longer.
Notes Payable- due within a one year period is a legal instrument that has terms and a
stated interest rate charged. Interest is accrued over time and not recorded at the
beginning of a loan.

Accounts Payable- most often due somewhere between 30 to 90 days
Interest Payable- Interested owned on a loan that has not come due for payment.
Salaries Payable- Salaries that have been earned by employees but not yet paid.
Income Tax Payable- Taxes are paid at the end of the year but are accrued during a

fiscal period so as to match them with the income earned.
Unearned Revenue-advance payments from customers will not be recorded as
revenue until after the work has been performed to earn the revenue.
Long-Term Liabilities-Title of a heading-is any money owed to creditors which will
be paid after a 12 month period of time or a complete fiscal cycle has ended.

Mortgage Payable- non-current amount
Notes Payable- non-current amount
Bonds Payable- is loans from the general public that are non-current amounts