liabilities definition accounting

Liabilities in accounting refer to the financial obligations or debts a company owes to external entities, such as loans, accounts payable, or accrued expenses. These are categorized as current liabilities (due within one year) or long-term liabilities (due after one year) and are recorded on the balance sheet. Understanding liabilities is essential for evaluating a company’s financial position, its ability to pay off debt, and overall financial health.