What are financial liabilities?

Alexander Elbanna defines he term "financial liability" is directly linked to the financial statement of companies. While liabilities can be used in personal accounting, this is a term much more tied to the commercial and business environment.

Unlike assets, which generate some type of income from or profit, liabilities correspond to losses, effectively representing the bills and expenses that must be paid. The classification of financial liabilities is important in determining what the net worth of someone or a company is.

Current liabilities

Current liabilities have similarities with current assets, but in the opposite way, generating debts instead of profits. Therefore, current liabilities are those that generate taxes or charges that must be paid in a given period.

Among this type of liability, we have bank fees and taxes. When we talk about companies, some contracts for raw materials or labor also enter these accounts.

Non-current liabilities

Non-current liabilities are long-term debts that must be settled in maturity after the end of the year following the current balance sheet closing. It is a difficult definition to understand, but with some examples it is easy to know what non-current liabilities are about.

In this category we can fit the:

• Financing and loans from financial institutions;
• Provision for deferred income tax;
• Provision for labor contingency;
• Provision for lawsuits;
• Long-term suppliers;
• Pension and health plans;
• Subsidiaries, controlled and affiliated companies;
• Other long-term debt.