Liabilities are amounts of money your business owes to creditors in the form of bills that are due, bank loans you’ve taken out, and bonds or warrants that you may have issued to raise money.
The basic idea behind these so-called financial instruments is always the same: You receive money or something else of value in exchange for the promise to pay the debt back over a certain period of time (usually with interest). Sometimes an asset that you own secures the debts. (If you don’t pay back what you owe as promised, the creditor can take the asset away from you.) Other times the debts are unsecured.
Current liabilities represent short-term debts that you have to repay within one year. These liabilities are closely tied to the current assets listed on the top half of your balance sheet because you have to pay them off with those assets. In most cases, current liabilities fall into two groups:
Accounts payable: These liabilities come in the form of bills that haven’t yet been paid for such things as utilities, telephone service, office supplies, professional services, raw materials, wholesale goods, or other invoices from providers or suppliers.
Accrued expenses payable: In addition to outside accounts payable, your business continuously accrues liabilities related to salaries or wages (if you have employees), insurance premiums, interest on bank loans, and taxes you owe. Any obligations that are unpaid at the time you run your balance sheet get grouped together in this category.
To figure out the money available on a day-to-day basis to keep your business up and running — known as your working capital — subtract your current liabilities from your current assets.
Working capital = Current assets @@ms Current liabilities
dummies
Source:http://www.dummies.com/how-to/content/business-plan-balance-sheet-current-liabilities.html
No comments:
Post a Comment