Non-interest bearing liabilities represent a debt, an amount of money that a company owes, without any interest or penalties accruing while the company holds the debt. Listed under the liability section of the balance sheet, non-interest bearing liabilities can be classified as either current or non-current liabilities.
Current Liabilities Classification
For a debt to be classified as a non-interest bearing current liability, the amount of money owed by the company must be paid within one year and does not require any interest payments. In order to meet the obligation to pay current liabilities, companies will either use current asset or create new current liabilities.
Examples of Non-Interest Bearing Current Liabilities
Examples of non-interest bearing current liabilities include: unpaid taxes not accruing penalties or interest, current income taxes, accounts payable and mortgage payments not accruing interest.
Non-Current Liabilities Classification
For a debt to be classified as a non-interest bearing non-current liability, the amount of money owed by the company is paid several years later and does not require any interest payments. Too many non-current liabilities can be dangerous for a company since these debts are due no matter the financial position of the company.
Types of Non-Interest Bearing Non-Current Liabilities
Examples of non-interest bearing non-current liabilities include the following debts which are to be paid later than one year: bonds payable not accruing interest, accounts payable and mortgage payments with no interest, and non-interest long-term notes.
Summary of Classification
On the balance sheet, liabilities should be broken down by current and non-current liabilities. If the non-interest bearing liability is due in one year or less, the debt must be listed as a current liability. If the non-interest bearing liability is due in over one year, the debt must be listed as a non-current liability.