definition of liabilities in accounting

Liabilities in accounting refer to the financial obligations or debts a business owes to external parties, including creditors, suppliers, and lenders. These obligations are settled through the transfer of assets or services. Liabilities can be short-term (due within a year, like accounts payable) or long-term (due after one year, such as loans or bonds payable). Understanding liabilities is essential for assessing a company’s financial health, as they are recorded on the balance sheet and directly impact a company's net worth.