What is Liabilities?
Liabilities: What a company owes to others.
Where Liabilities fits
Liabilities is part of Financial Statements in Accounting. Three statements tell the story: the balance sheet is a snapshot of assets, liabilities and equity; the income statement shows profit; the cash flow statement tracks real money.
Practical tip
Read all three together; one alone can mislead.
Related terms
- Balance sheet
- A snapshot of assets, liabilities and equity on one date.
- Income statement
- Shows revenue, costs and profit over a period.
- Assets
- Things a company owns that have value.
- Equity
- The owners' share: assets minus liabilities.
- Cash flow statement
- Report of cash coming in and out from operations, investing and financing.
- Operating profit
- Profit from core operations before interest and taxes.
Formulas you will use with it
Test yourself
Which term means: “What a company owes to others.”?
Assets · Cash flow statement · Liabilities
Answer: Liabilities
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