{"id":1923,"date":"2023-08-23T12:31:28","date_gmt":"2023-08-23T09:31:28","guid":{"rendered":"https:\/\/akaunting.com\/hc\/?post_type=glossary&p=1923"},"modified":"2024-09-03T12:16:31","modified_gmt":"2024-09-03T09:16:31","slug":"current-liability","status":"publish","type":"glossary","link":"https:\/\/akaunting.com\/hc\/terms\/current-liability\/","title":{"rendered":"Current Liability"},"content":{"rendered":"
\n\n\n

What is a Current Liability?<\/strong><\/h2>\n\n\n\n

A current liability is a type of debt or obligation that a company is expected to settle within its operating cycle or within one year, whichever is longer.<\/p>\n\n\n\n

It represents the company’s short-term financial obligations that are due in the near future. Current liabilities are recorded on a company’s balance sheet and are essential to its financial health and liquidity.<\/p>\n\n\n\n

What are liability Accounts in accounting?<\/a><\/p>\n\n\n\n

Current liabilities example:<\/strong><\/h2>\n\n\n\n

Accounts Payable<\/strong>: Amounts owed to suppliers or vendors for goods or services purchased on credit.<\/p>\n\n\n\n

Short-term Loans and Lines of Credit<\/strong>: Borrowings due within one year or less.<\/p>\n\n\n\n

Accrued Expenses<\/strong>: Expenses incurred but not paid, such as wages, interest, taxes, or utilities.<\/p>\n\n\n\n

Income Taxes Payable<\/strong>: Taxes owed to the government based on the company’s taxable income.<\/p>\n\n\n\n

Unearned Revenue<\/strong>: Advance customer payments for goods or services that have not been provided.<\/p>\n\n\n\n

Dividends Payable<\/strong>: Amounts owed to shareholders as dividends declared but not paid.<\/p>\n\n\n\n

Current Portion of Long-term Debt<\/strong>: The long-term debt is due within one year.<\/p>\n\n\n\n

Frequently Asked Questions<\/strong><\/h2>\n\n\n\n

Is deferred revenue a current liability<\/strong><\/h3>\n\n\n\n

Deferred revenue is not always a current liability. It depends on the terms of the sale and when the revenue is earned.<\/p>\n\n\n\n

Deferred revenue is revenue that has been received but not yet earned. This can happen when a company sells goods or services on credit or receives a prepayment for goods or services that will be delivered in the future.<\/p>\n\n\n\n

If the revenue is earned within one year, deferred revenue is classified as a current liability. However, deferred revenue is classified as a non-current liability if the revenue is earned after one year.<\/p>\n\n\n\n

Is unearned revenue a current liability?<\/strong><\/h3>\n\n\n\n

Yes, unearned revenue is a current liability. It is money that a company has received from customers in advance for goods or services that have not yet been delivered.<\/p>\n\n\n\n

Is accounts payable a current liability?<\/strong><\/h3>\n\n\n\n

Yes, accounts payable is a current liability. It is money that a company owes to its suppliers for goods or services that it has purchased.<\/p>\n\n\n\n

Is interest payable a current liability?<\/strong><\/h3>\n\n\n\n

Yes, interest payable is a current liability. It is money that a company owes to its creditors for interest that has accrued on loans or other forms of debt.<\/p>\n\n\n\n

Interest payable is classified as a current liability because it is expected to be paid within one year.<\/p>\n\n\n\n

For example, if a company has a loan with an interest rate of 10% and the loan matures in one year, the interest payable would be classified as a current liability.<\/p>\n\n\n\n

What are expense accounts in accounting?<\/a><\/p>\n\n\n\n

Is a current liability an expense?<\/strong><\/h3>\n\n\n\n

No, a current liability is not an expense. A current liability is a debt or obligation that a company expects to pay within one year or the company’s operating cycle, whichever is longer. On the other hand, an expense is a cost that is incurred in the course of generating revenue.<\/p>\n\n\n<\/div>","protected":false},"menu_order":0,"template":"","letter":[23],"class_list":["post-1923","glossary","type-glossary","status-publish","hentry","letter-c"],"acf":[],"_links":{"self":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1923","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/types\/glossary"}],"version-history":[{"count":7,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1923\/revisions"}],"predecessor-version":[{"id":2965,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1923\/revisions\/2965"}],"wp:attachment":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/media?parent=1923"}],"wp:term":[{"taxonomy":"letter","embeddable":true,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/letter?post=1923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}