In accounting, a liability is an amount a business owes and must pay, such as a loan, a supplier bill, or wages not yet paid. Amounts due within a year are current liabilities. Amounts due later are long-term liabilities. On the balance sheet, assets minus liabilities equals the owners’ equity. This is separate from liability coverage, the insurance that pays if you hurt someone or damage their property.

Related Lessons:

• Click Here for our lesson on How to Read a Balance Sheet
• Click Here for our lesson on Creating Financial Statements
• Click Here for our lesson on How Companies Finance Their Growth