What is a current liability?

A current liability is an obligation that is 1) due within one year of the date of a company's balance sheet and 2) will require the use of a current asset or will create another current liability. If a company's operating cycle is longer than one year, current liabilities are those obligation's due within the operating cycle.

Current liabilities are usually presented in the following order:

1. the principal portion of notes payable that will become due within one year
2. accounts payable
3. the remaining current liabilities such as payroll taxes payable, income taxes payable, interest payable and other accrued expenses

The parties who are owed the current liabilities are referred to as creditors. If the creditors have a lien on company assets, they are known as secured creditors. The creditors without a lien are referred to as unsecured creditors.

The amount of current liabilities is used to determine a company's working capital (current assets minus current liabilities) and the company's current ratio (current assets divided by current liabilities).

DEFINITION of 'Current Liabilities' from INVESTOPEDIA

A company's debts or obligations that are due within one year. Current liabilities appear on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.


Essentially, these are bills that are due to creditors and suppliers within a short period of time. Normally, companies withdraw or cash current assets in order to pay their current liabilities.

Analysts and creditors will often use the current ratio, (which divides current assets by liabilities), or the quick ratio, (which divides current assets minus inventories by current liabilities), to determine whether a company has the ability to pay off its current liabilities.

Examples of Current Liabilities

A liability is a debt, obligation or responsibility by an individual or company. Current liabilities are debts that are due within 12 months or the yearly portion of a long term debt.

Current Liabilities for Companies

  • Accounts payable - This is money owed to suppliers.
  • Accrued expenses - These are monies due to a third party but not yet payable; for example, wages payable.
  • Accrued Interest - This includes all interest that has accrued since last paid.
  • Bank account overdrafts - These are short term advances made by the bank for overdrafts.
  • Bank loans or notes payable -This is the current principal portion of along-term note.
  • Current maturities of long-term debt - This is the part of a long term debt that is due in the upcoming 12 months.
  • Customer deposits or unearned revenue - These are payments given by customers as an advance for future work that is expected to be completed by the end of the next 12 months.
  • Dividends payable - These are the dividents declared by the company Board of Directors that have not yet been paid to the shareholders.
  • Income taxes payable - These are taxes owed to the government that have not yet been paid.
  • Interest payable - This is interest owed to lenders that has not been paid.
  • Notes payable (other than bank notes) - This is the current principal portion of long-term notes.
  • Payroll taxes payable - This is taxes withheld from employees or taxes related to employee compensation.
  • Rental payments - These are paid for renting buildings, land, pastures, or other property or structures.
  • Short-term notes payable - These loans are due upon demand or within the next year.
  • Sales taxes payable - These are taxes collected from customers for the government that need to be paid to the government.
  • Wages - These are owed to employees.

Payroll Current Liabilities

  • Accrued salaries and wages payable
  • Employee U.S. Federal income tax withheld
  • Employee state income tax withheld
  • Employee local income tax withheld
  • Employee FICA withheld
  • Employee Medicare withheld
  • Employee garnishments withheld
  • Employee benefits including employee insurance deduction withheld and 401 K or IRA deductions withheld
  • Employer provided benefits
  • Employer FICA contribution payable
  • Employer Medicare contribution payable
  • Employer Federal unemployment payable
  • Employer state unemployment payable
  • Employer Workmen's Compensation insurance payable
  • Employer provided health insurance payable
  • Employer provided life insurance payable
  • Employer provided 401 K contributions payable
  • Employer provided IRA contributions payable

Accrued and Estimated Liabilities

  • Accrued real estate and property taxes payable
  • Accrued income and franchise taxes payable
  • Accrued Federal taxes payable
  • Accrued state taxes payable
  • Accrued local taxes payable

Personal Current Liabilities

  • Car loans
  • Credit card debt
  • Current monthly bills - rent, utilities, insurance, etc
  • Home equity loan
  • Home mortgages
  • Lines of credit
  • Loans for investment purposes
  • Miscellaneous debts - hospital charges for example
  • Personal loans
  • Rental or other property mortgage
  • Student loans
  • Unpaid Income Tax
  • Unpaid Taxes and Interest
These different examples of current liabilities for companies and for individuals show the breadth of liability which could be the obligation of a company or individual.

References and Sources
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