Liabilities in Accountancy

Hello everybody,

now let's go for liability definition.

Liability in accountancy word definition is like this: present obligation of the firm to transfer economic benefits in the future to another party that arise from a past event or transaction.

Definition has following key parts:

  1. present obligation
  2. transfer benefits
  3. past transaction event

From this standpoint bank loan is liability. 

Potential lawsuite without estimated fine size can't be liability, but definetly should be mentioned in footnotes of balance sheet. 

3 years warranty is also liability. For example warranty for the car. And if company can estimate their obligations on warranty then those kind of liabilities are named provisions.

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