Types of Liabilities on Balance Sheet
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Table Of Contents
Types of Liabilities on the Balance sheet
Here is the list of the type of liabilities on the Balance Sheet
- Notes Payable
- Accounts Payable
- Salaries Payable
- Interest Payable
- Creditor
- Debenture/Bonds
- Owner Equity
Liabilities are the financial obligation of the company which is legally binding on it to be payable to the other entity, and primarily there are two types of liabilities on the balance sheet 1) current liabilities that are payable within one year, and 2) non-current liabilities that are payable after one year.
Table of contents
Top 7 Types of Balance Sheet Liabilities
#1 - Notes Payable
Notes payable is one of the liabilities for a company. Notes payable is the general ledger liability, which records the face value of promissory notes it has issued. The amount of notes payable represents the amount that remains to be paid. It includes two parties. Firstly borrower and issuer. So notes payable is one of the liabilities for the company because they have to pay interest.
#2 - Accounts Payable
This type of Liability includes the payment due for the services purchased from other organizations on credit, so it is the liability for the company.
#3 - Salaries Payable
The salary which is not paid during the month and the company is liable to pay is called unpaid or outstanding salary, and this also a liability type for the company. It is also called wages payable in case of labor.
#4 - Interest Payable
Interest payable means the outstanding interest on deposit or debenture issued by the company for financing the capital. For a capital financing company, issue debentures from the general public or accept deposits from the general public, which is also one of the liabilities for the company.
#5 - Creditor
The creditor is the person or entity from which the company purchases raw material on credit, so it is also a liability.
#6 - Debenture/Bonds
Company issue bonds or debentures to raise the capital for business expansion, so they have to pay interest on those bonds, and they have to pay the full amount at the maturity date.
#7 - Owner Equity
This type of Liability means the initial capital or investment made by the owner into a business, so it is the liability for the business because business and owner are a separate entity.
Examples
Example#1
The company reports total assets of Rs 120000 at the time of closing of the accounting year, accounts Payable 40000, shareholder equity 60000 and creditor 40000 and supplier 50000 and the company having debtor of Rs 70000. From the above information, prepare the balance sheet.
Below is given data for the calculation of Balance Sheet Liabilities.
Calculation of Total Liability
Total Liability = 60000+40000+40000+50000
Total Liability = 190000
Calculation of Total Asset
Total Asset = 120000+70000
Total Asset = 190000
From the above example, we can see that Total Asset = Total Liability, which means that the company has enough assets to pay off its long-term and short-term liability.
Example#2
Havells India is in the business of lights. Havells has the following assets and liabilities.
Below is given data for the calculation of Balance Sheet Liabilities.
Calculation of Total Liability
Total Liability = 130000+25000+50000+80000+35000
Total Liability = 320000
Calculation of Total Asset
Total Asset = 90000+150000+40000+40000
Total Asset = 320000
From the above balance sheet evaluation, we can say that Havells India has a good financial position and enough assets to pay current and long-term liability. Havells India had invested more in fixed assets.
Example#3
TCS is in the field of IT and a global leader in the field of IT. They have clients across the world, and they provide services all over the world. The following is the information available on TCS. So prepare the balance sheet or financial position report for the financial year-end 2018.
Below is given data for the calculation of Balance Sheet Liabilities.
Calculation of Total Liability
Total Liability = 180000+80000+90000+150000+30000+80000
Total Liability=610000
Calculation of Total Asset
Total Asset = 150000+20000+50000+40000+50000+60000+60000+40000+40000
Total Asset=610000
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