If you’re a small business owner, then you know that one of the most important things to understand is your company’s financial statement. In particular, you need to have a firm grasp on your balance sheet—or, more specifically, your liabilities.
But what exactly are liabilities? And what types of liabilities should you be aware of? Here’s a quick overview:
Current Liabilities:
These are debts that need to be paid within one year. Examples include short-term loans, accounts payable, and accrued expenses.
Long-Term Liabilities:
These are debts that won’t come due for more than a year. Examples include long-term loans and bonds payable.
Equity Liabilities:
These are funds that have been invested in the company by shareholders. Equity is not technically a debt, but it is still considered a liability because it represents money that needs to be repaid (with interest).
As a small business owner, it’s important to have a firm understanding of your company’s financial statement—including your balance sheet. Your balance sheet lists all of your assets (what you own) and liabilities (what you owe). Of those liabilities, there are three main types: current, long-term, and equity. By understanding the difference between each type of liability, you can make better decisions about how to manage your finances and grow your business.
Incline Business Essentials 