Current liabilities means the debt company owes to the creditors and bank for a short period. It usually for not more than one year and if the company fails to clear off the debts then there are some obligations, and then the company has to settle off the debts by their current assets or to provide any service in return.
Current liabilities are most likely to record in the balance sheet. However, this does not define the amount which not yet occurred has to show in balance sheets. Example, if you need to pay the salary for upcoming months to the employers, then there is no need to made an entry for the same. This is because you have not taken the services you need in exchange for the salary.
List of Current Liabilities:
This list will clear your mind and doubts about the current liabilities. Here the list follows:
- Accounts Payable.
- Notes Payable
- Bank account overdrafts.
- Current portion of long term debt
- Current Lease payable
- Current tax payable
- Accrued expenses.
- Dividend payable
- Unearned revenue
#1 Accounts Payable:
It is the first in the list of current liabilities. It shows that the amount which is due to the supplier within the current year. Hence, It is required to pay the pending suppliers.
#2 Notes Payable:
Notes payable occurs by short term credits taken from the bank.
#3 Bank account overdrafts:
The overdraft bank does save your account from going into NPA. Hence, It is a short term adjustment done by the bank and needed to pay in a short period.
#4 Current Portion of long term debt:
The current year due to long term debt is the current portion of long term debt.
#5 Current lease payable:
Type of interest charged on the current portion of long term debts. Hence, if you not paid on time, the current lease is payable.
#6 Accrued Income Tax:
The income tax owed to the government but still not have paid.
#7 Accrued Expenses:
Expenses which are no need to pay right now but already incurred like salaries, tax, bill payments are costs accrued.
#8 Dividend Payable:
The declared amount of divided which is payable to the shareholders but not yet paid. Hence, the dividend added to the list of current liabilities.
#9 Unearned Revenue:
It is also the part of current liability because you are getting paid in advance before the completion of original work. Hence, It will add in your current liabilities list.
Current liabilities are the biggest headache for any company. Usually, the current liabilities exist in the form of short term loans that are due within a year or the due payable to the suppliers.
However, if you are not able to clear your debts on time then there are some obligations made by the bank and the creditors to take off your current assets and cleared their debts. Hence, you need to make sure about the payments of current liabilities and if you know about your company condition then better settlement.