Liabilities

The boring technical definition: A liability is the future sacrifices of economic benefit that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets. A liability is legally defined by the following characteristics:

Any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time;

A duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services, or other transaction yielding an economic benefit, at a specified or determinable date, on occurrence of a specified event, or on demand;

A duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement; and,

A transaction or event obligating the entity that has already occurred

OK, but more Shmoopily fun...What is a liability? It's what you owe.

You bought 4 million gumballs on credit for your party pack for the parade; the money is owed to Gumballs 'R' Us in 90 days.

Short-term liability. Next...

You borrowed 83 million dollars to set up your new Dental Drive-thru service, due in 12 years at 7% interest a year.

Long-term liability.

Why long-term? Because it comes due in over a year. And that’s basically it. Liability comes in two flavors - short and long-term and it’s one of the key elements of the balance sheet, as it lives in this space riiiight over here…

So yeah, that’s liability.

Now, considering how many gumballs you’ve consumed in the past month, you really should get yourself to a good drive-thru dentist...