Current Liabilities are an obligation that must be repaid within the current period or the next year whatever is longer. In other words, these are the amounts to be paid within one year for salaries, interest, accounts payable, and other debts. Current Liabilities can be found on your Balance Sheet.
Current Liabilities can be a short-term loan or long-term debt that will become due in a year and require payment of current assets.
Further, such obligations will typically involve the use of current assets, the creation of another current liability, or the providing of some service.
The formula for calculating the current liabilities and discuss each of the components below.
(Notes Payable) + (Accounts Payable) + (Short-Term Loans) + (Accrued Expenses) + (Unearned Revenue) + (Current Portion of Long-Term Debts) + (Other Short-Term Debts)
An average current liabilities refer to the average value of a company’s short-term liabilities from the beginning balance sheet period to its ending period. Below is the average current liabilities formula:
(Total current liabilities at the beginning of the period + Total current liabilities at the end of the period) / 2
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Whenever a company falls short of funds for running its business operations, it takes credit in terms of the loan by lenders. There are various categories of current liabilities, the most common ones are account payable which arises from purchases that are not fully paid off or the company has recurring credit terms with the suppliers. Some other reasons are short-term notes payable, income tax payable, etc.
Examples of current liabilities are as follows:
They are shown in the liabilities section of the balance sheet.