Date created: Oct 25, 2022 • Last updated: Feb 10, 2023
What is Current Liabilities?
Current liabilities reflect a company’s short term debt on the Balance Sheet or Statement of Financial Position. This debt is short term and must be paid within a year. It's important for a company to identify current liabilities in order to understand their financial solvency, often this is done in conjunction with current assets. Some common accounts that fall under current liabilities are accounts payable, deferred revenue, interest payable, short-term debt, dividend payable, and many others depending on industry.
Current Liabilities Formula
How to calculate Current Liabilities
A company has an account receivable balance of $50,000, a 4 year loan of $1,000,000 of which $250,000 is payable in the next 12 months, and deferred revenue of $500,000 from customers that purchased an annual subscription. To calculate current liabilities you need to add the above amounts for short-term liabilities as follows, ($50,000+$250,000+$500,000=$800,000). The company’s current liabilities totals $800,000 and the remaining portion of the 4 year loan ($750,000) will fall under long-term debt on the balance sheet