Liabilities
Financial Accounting glossary · The Accounting Cycle & Financial Statements
Definition
Present obligations expected to be settled by an outflow of economic resources.
Liabilities in plain English
Liabilities are simply the things a business owes — its debts and obligations that it will have to pay off later by handing over money, goods, or services. "Present obligation" means the company is already on the hook right now (not just might be someday), and "outflow of economic resources" is a fancy way of saying something valuable will have to leave the business to settle it. Think of your phone bill: the moment you've used the service, you owe the money even before you pay it — that's a liability. Loans, unpaid supplier bills, and wages you owe employees are all common examples.
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