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Current Liability

A current liability is a debt or obligation your business expects to pay within one year. Accounts payable, credit card balances, payroll taxes due, and the current portion of loans are all current liabilities.

Current Liability Definition

Current liabilities are debts and obligations your business must pay within the next 12 months. They appear on the balance sheet under the liabilities section and represent your near-term financial obligations.

Common Current Liabilities

  • Accounts payable — bills from vendors you haven't paid yet
  • Credit card balances — outstanding credit card debt
  • Payroll liabilities — wages, taxes, and benefits owed to employees
  • Sales tax payable — collected sales tax not yet remitted
  • Current portion of long-term debt — the next 12 months of loan payments
  • Accrued expenses — expenses incurred but not yet billed (utilities, interest)
  • Unearned revenue — customer prepayments for services not yet delivered

    • Why Current Liabilities Matter

  • They determine your current ratio (current assets ÷ current liabilities) — a key measure of short-term financial health
  • Lenders examine them to assess your ability to meet near-term obligations
  • If current liabilities exceed current assets, you may have a cash flow problem

    • How Current Liabilities Show Up in QuickBooks

    QuickBooks categorizes liabilities automatically based on account type. Accounts payable, credit cards, and payroll liabilities all post to current liability accounts. Run a balance sheet to see your total current liabilities at any point in time.

    FAQ

    Q: What's the difference between current and long-term liabilities?

    A: Current liabilities are due within 12 months. Long-term liabilities (like a 5-year loan balance beyond the next year's payments) are due after 12 months.

    Related Terms

  • Accounts Payable
  • Balance Sheet
  • Current Ratio
  • Working Capital

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    Related Terms

    Accounts Receivable

    Accounts receivable (AR) is money that customers owe your business for products or services you've already delivered. It's the flip side of accounts payable — instead of you owing someone, someone owes you. AR is an asset on your balance sheet because it represents future cash coming in.

    Cash Flow Statement

    A cash flow statement is one of the three core financial statements (along with the P&L and balance sheet). It shows how cash moved through your business over a period — where it came from and where it went. It's organized into three sections: operating activities, investing activities, and financin

    Amortization

    Amortization is the process of spreading the cost of an intangible asset over its useful life. It's essentially depreciation's cousin — depreciation handles physical assets (equipment, vehicles), while amortization handles non-physical ones (patents, software licenses, trademarks). It can also refer

    Break-Even Point

    The break-even point is the sales level at which your total revenue exactly equals your total costs — you're not making a profit, but you're not losing money either.

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