We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Current Liability?

Malcolm Tatum
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Current liabilities are any type of obligations or debts that are to be settled in full within one calendar year. Examples of these types of liabilities would be invoices for goods that are to be paid within thirty days of receipt, short-term loans that must be paid off in six months to a year, or even any debts that must be paid immediately. In most situations, current liability is satisfied by using cash assets on hand to retire the debt, using a structured schedule that minimizes the accumulation of additional debt in the form of finance charges.

One of the most common forms of current liability includes the month-to-month expenses that are documented as accounts payable in the accounting records. Liabilities of this type include basic monthly expenses such as rental or mortgage payments, utility bills, and minimum payments due on loans or credit accounts. These types of liabilities are found on the balance sheet. In some cases, the line items are arranged based on the due date associated with each liability, making it easier to settle each debt on or before that date, and thus avoid the application of late fees or additional interest.

Properly accounting for current liability is important, in that many lenders will look at these expenses when considering the extension of a loan. The cumulative amount of the combined liabilities due each month will be compared to the cash assets available to cover those debt obligations. For many households as well as companies, the core of the cash assets is the monthly income or revenue that is received. If the lender feels that the ratio between an applicant’s current liability and his or her current assets indicates that the loan can be repaid according to the terms of the loan contract, the chances of receiving the loan are greatly improved.

Identifying and managing current liability obligations is in the best interest of every household, business, or other type of entity. Doing so helps to maintain a higher credit rating, especially if creditors report regularly that minimum payments are received on time and that debts are settled according to terms. Failure to do so can place the credit rating in jeopardy, and thus make it harder to obtain financing and credit when it is needed or desired. Over time, this failure to manage current liability in a responsible manner can lead to a complete collapse of the entity, and may lead to bankruptcy.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.