liability
/ ly-uh-BIL-it-ee /
Think of all the things you will have to pay or hand over later: the rent due at month-end, the credit-card bill, the money your cousin lent you. Each is a claim that someone else has on your future resources. For a business, those claims are called liabilities, and they fill the right side of the balance sheet alongside the owners' stake.
Formally, a liability is a present obligation of the business, arising from a past event, that is expected to be settled by giving up some resource — usually cash, but sometimes goods or services. The key word is 'present obligation': the duty already exists now, even if payment happens later. Examples include accounts payable (bills to suppliers you have not paid yet), loans and notes payable, wages owed to staff, and unearned revenue (cash a customer prepaid for goods you still owe them). If a workshop buys 2,000 of lumber on credit, it has both a 2,000 asset (lumber) and a 2,000 liability (the supplier's claim) until it pays.
Liabilities matter because they show how much of a company's resources are financed by others rather than by the owners, which is central to judging risk: a business drowning in debt can be fragile even if it owns a lot. A useful caution: not every future spending is a liability today. A salary you will pay next month for work not yet done is a future expense, not a present obligation, so it does not sit on today's balance sheet. The obligation must already exist for it to count.
A printing shop's liabilities are: 4,000 owed to a paper supplier (accounts payable), a 15,000 bank loan (notes payable), and 1,200 collected from a customer for posters not yet printed (unearned revenue) — 20,200 of claims others hold against it.
Three different liabilities making up the claims outsiders hold on a shop.
A liability requires a present obligation from a past event — a cost you merely plan to incur later is not yet a liability. Unearned revenue is a liability (you owe goods or services), not income.