What Are Current Liabilities?


Quick Answer

Current liabilities, also known as short-term liabilities, are business debts that a company reasonably expects to pay with cash within one year or within the company's fiscal year, whichever is longer according to The Law Dictionary, an online version of Black's Law Dictionary. The total amount of current liabilities is tracked in a company's accounting system and reported on its balance sheet.

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What Are Current Liabilities?
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Full Answer

For most small- and medium-size businesses, accounts payable is the primary component of current liabilities. Other business debts that typically fall into the current liabilities category are deposits, short-term notes, repurchase agreements, commercial paper and accrued liabilities, such as salaries, wages, taxes and interest. Any debt that doesn't meet the criteria of a current liability is categorized as a long-term liability. Classifying liabilities as either current or long-term helps investors and creditors assess the financial health of the business and the risks involved in its outstanding debts.

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