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Liabilities

Liabilities are obligations that a firm still owes.

PRO TIP: If an account has "Payable" next to it, it's probably a liability. Just don't forget about Unearned Revenue!

There are two types of liabilities you need to know:

Short-Term Liabilities

Short term liabilities are those debts that your company expects to pay off within 1 year

AccountIn relation to a lemonade stand...
Accounts PayableYou paid for a new pitcher on credit, promising to pay the store back within a year.
Notes Payable (short-term)You took a loan out from the bank for a new table, which will be paid back within a year.

Don't get Accounts Payable vs. Notes Payable twisted!

Accounts Payable deal with purchases on credit.

...vs...

Notes Payable deal with loans.

Long-Term Liabilities

Long term liabilities are those debts that your company expects to be paid in 1+ years.

AccountIn relation to a lemonade stand...
Notes Payable (long-term)You took a loan out from the bank for a new table, which will be paid back in over 1 year.
Mortgage PayableYou bought a building to mass-produce lemonade and need to pay it off over the next 5 years.