What is a liability?

Definition of Liability

A liability is an obligation arising from a past business event. It is reported on a company's balance sheet.

Liabilities are also part of the basic accounting equation: Assets = Liabilities + Stockholders' Equity. Liabilities are often viewed as claims against the company's assets. However, liabilities can also be viewed as sources of the company's assets.

Examples of a Liability

Examples of a liability include: