Definition of Current Liabilities
Current liabilities (also known as short-term liabilities) for most companies are the obligations that must be paid within one one year of the balance sheet date or will create another current liability. (For companies with operating cycles greater than one year, their current liabilities are the obligations due within the operating cycle.)
Typical Current Liabilities
Some common examples of current liabilities that are reported on a company’s balance sheet include the following:
Accounts payable which are the amounts owed to vendors who have supplied goods or services. The amount of accounts payable is documented by the vendor invoices that have been approved and processed, but have not yet been paid.
Deferred revenues which are the amounts that a customer has prepaid and will be earned by the company within one year of the balance sheet date. An example is a retailer’s unredeemed gift cards.
Accrued compensation which includes a company’s obligations related to employees working for the company.
Other accrued expenses or liabilities which includes amounts owed and not reported as accounts payable or accrued compensation. Examples include the interest expense that the company has incurred (but has not yet paid) and repairs that took place but the vendor’s invoice has not been processed.
Short-term notes which include loans from banks and other lenders that come due within one year of the balance sheet date.
Current portion of long-term debt which includes the principal payments of a mortgage loan or other long-term loans that must be paid within one year of the date of the balance sheet.
There is no requirement that the current liabilities be presented in the order in which they will be paid. As a result, a loan that is due in 11 months might be listed first even though other obligations will be due within one month.
