What is liability in accounting?

The liability in accounting It shows all the debts and obligations that the company owns. Accounting collects accounts with negative credit balance. That is, it includes the debts that the company currently owns whose origin is given in past transactions.

Said accounts of a creditor nature, decrease their value in the debit and increase their value in the credit.

When the management control of a company is evaluated, the relationship of the liability with the short-term credits is considered, which are classified as:

• Credits maturing in 90 days
• Loans maturing in 6 months
• Credits maturing in 12 months

The credits presented by the passive, are generally from trade, that is, they are a consequence or result of the acquisition of goods materials, investments of another type, for the acquisition of dividends, interest on money received in loans.

Liability Classification

Liabilities, like assets, are divided into six (6) large groups.

Current liabilities:

Consisting of transactions for the purchase of merchandise, materials and equipment or services from suppliers, creditors and advances from clients to invoices issued on credit and short-term loans.

The current liabilities It incorporates those debts of the company that must be paid in a term or course that does not exceed one year.

In general terms, the accounts included in current liabilities are:

• The promissory notes, which are nothing more than the loans requested from the bank.
• The bills to pay, which are the drafts that are signed to the providers.
• Accounts payable, which are purchases made by the company on credit for up to one year.
• Taxes payable, are all those taxes that must be paid to the treasury that has been foreseen and calculated in advance, after having reviewed the sales billing and debited the taxes for shopping.
• Expenses payable, resulting from the acquisition of products and / or services, purchase of minor goods for the management and daily performance of the company.
• Credit balances of accounts receivable from customers, reducing their account receivable at the same time, transforms the remaining balance into a liability.

Long term passives

This group includes the accounts that the company must cancel, within a period greater than one (1) year.

Among these accounts that are reflected in the Long-term liabilities, are the following:

• Long-term advances or loans, acquired by companies to carry out works or large-scale projects, during the operation of the company they use the entities banking.
• Mortgages payable applicable to property or land owned by the company.
• Long-term effects payable are those money orders acquired for credit purchases of more than one year.
• Long-term accounts payable are those credits acquired for credit purchases with a term of more than one year.

Provisions or sections

This set of accounts includes those that represent charges from previous years or the current one, intended to represent the obligations or debts of a social nature contracted by the business. In addition, eventual or contingency sections or provisions are also included.

The most representative of this group are:

• Provision for social benefits, it is essential for the company to have this provision, considering the salary increases, according to the policy with which the human resources of the business.
• Section or provision for profits of employees and / or workers, (same as the previous situation)
• Section or provision for vacations of employees and / or workers (the same premise is used as in the case of social benefits and profits)
• Section or provision for warranties on products or services.
• Section or provision for pending litigation.
• Section or provision for compensation to third parties.
• Section or provision for any other item that the company deems necessary to foresee.

Deferred credits

If some amount has been collected in advance, this transaction will go to liabilities, this group will reflect the amounts that the company has received for anticipated income.

Some transactions that serve as examples in this case are:

• Interest cobrados for anticipantin.
• Rent collected in advance.
• Insurance collected in advance.
• Any other item that has been collected in advance by virtue of a service provided by the company.

Other passives

They are accounts with very special characteristics and among them are:

• Employee profits, unclaimed at the time.
• Deposits received as collateral.

Equity accounts

These accounts are based on the investments made by each owner, the donations for the incorporation of the company, formation or capital increase. In addition to these, there are the performance gains not distributed or decreed, which also constitute the equity of the company and commonly used in the capital account.

The accounts that are incorporated into this group are the following:

• Paid-in capital.
• Surplus.
• Reservation.
• Earnings (the amount of which increases the capital).
• Losses (whose amount decreases the capital).