| One of the main objectives while learning | | | | Statements |
| accounting basic is to understand accounting | | | | For a better understanding of this definition and |
| terms and definitions and explore these items in | | | | one of the accounting basic concepts, the |
| detail with the help of practical examples. In this | | | | examples of current debt can be: |
| article we will be exploring the concept of current | | | | - accounts payable, i.e. amounts due to the |
| liability and its reflection in the financial statements. | | | | suppliers for the goods, raw materials, inventory, |
| What is Current Liability? | | | | services supplied |
| Referring to the concept of current liability we can | | | | - accrued salaries, i.e. amounts due to the |
| that it is a liability which is due within quite short | | | | workers and employees for the work done |
| period of time, usually one year or less, and which | | | | - short term loans, i.e. loans which are due within |
| will be paid by cash or other current asset. There | | | | one year or less |
| are several main aspects to note from this | | | | - other accrued liabilities and current debt. |
| definition: | | | | Considering the relation of current liability with the |
| - First, current debt is liability, i.e. the amount | | | | financial statements, note that this item is |
| which business owes to lenders or creditors, so it | | | | reflected on the liabilities side of the balance sheet |
| need to be paid back | | | | and total amount of current debt has to be |
| - Second, this liability is due within short period of | | | | calculated and reflected in the balance sheet. This |
| time, year or less. This means that current debt | | | | amount is important since it indicated how much |
| will have to be paid within a certain period of time, | | | | the business will have to pay back to creditors |
| which is short. | | | | within one year and whether it is able to fulfil its |
| - Third, this liability will have to be paid by cash or | | | | financial obligations. Also value of current liabilities is |
| other current asset, which means that current | | | | compared with the value of current assets to |
| liability and current asset are closely related. | | | | investigate whether the business has enough |
| Examples and Reflection in the Financial | | | | current assets to cover current debt. |