Definition of Current Liabilities

Claims by third parties on the total assets of the business are called liabilities. Liability based on tenure is generally of 2 types. Namely: 1. Current liabilities, 2. Long term liabilities.

Liabilities which are incurred in the normal course of business and which have to be paid within the current accounting period are called current liabilities. Current filing features are as follows:

1. It is for 1 year duration. Regular accounts of the current activities of the business must be paid within the period.
2. It is used to acquire current assets and carry out normal business activities.
3. It accrues continuously and may be repayable.
4. Failure to pay current liabilities creates a liquidity crisis for the business. This has an adverse effect on the reputation and management of the business. Current filing types: Current liabilities are divided into 3 categories based on assurance of repayment. It is discussed below:

1.Specific liability
The liability which is specified in advance is called specific liability. Such liabilities mainly arise from business contracts. Eg: Creditors, Notes Payable, Bank Deposits, Withdrawals, Outstanding Expenses etc.



2. Contingent liability
A liability that exists but the actual amount is not currently certain or known is called Contingent liability. Contingent liability is generally estimated. Eg: Estimated sums of money for provision of after sales services are considered as estimated liability.

3. Probable liability
A liability that is more likely to occur in the future is called a contingent liability. The liability will only occur if a particular event occurs. For example: Liability due to pending cases. If the company sues If lost, a lawsuit is filed.
Current liabilities can be of different types. Below is it Shown:
1. Accounts Payable / Creditors,
2. Notes Payable,
3. expenses payable,
4. Unearned income/advance received,
5. dividend payable,
6. VAT payable,
9. Loans for short-term refinancing,
8. Buyers' Advances and Security,
9. Income Tax Arrears,
10. Employee related liabilities.