Current Liabilities Vs. Long Term Liabilities

by Alan Kirk; Updated September 26, 2017

Many businesses operate using debt as a tool. Not all debt is the same. There are debts that are paid off relatively quickly, and other debts that are paid off over an extended period of time. Knowing how to classify a company's debts is important when assembling the financial balance sheets for the company.

Current Liabilities Definition

Current liabilities are considered short term debt for a company. Current liabilities are amounts that can be paid off within one year.

Long Term Liabilities Definition

Long term liabilities are items that a company intends to keep on their financial balance sheet for longer than a one year period of time.

Types Of Long Term Liabilities

Long term liabilities do not require interest payments during the current year. Some of these include leases, deferred expenses and employee benefits that are payable in the future.

Types of Short Term Liabilities

Wages, expenses such as electricity and water, payroll taxes and short term leases are all considered short term liabilities on their balance sheets.

Ratios

The current ratio used in accounting is computed by dividing the current assets of a company by its current liabilites, also known as its short term liabilities.

About the Author

Alan Kirk has been writing for online publications since 2006. He has more than 15 years' experience in catering, management and government relations. Kirk has a bachelor's degree in business management from the University of Maryland.