Question

Debts and obligations of a business are referred to as

Answer 1

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Debts and obligations of business are reffered to as Liabilities.......

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Answer 2

Debts and obligations of a business are referred to as Liabilities

A liability is a legally binding obligation payable to another entity. Liabilities are incurred in order to fund the ongoing activities of a business.

Liability definition as per IFRS :

A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits

Liabilities are reported on a balance sheet and are usually divided into two categories:

Current liabilities — these liabilities are reasonably expected to be liquidated within a year. They usually include payables such as wages, accounts, taxes, and accounts payable, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations (e.g. from purchase of equipment).

Long-term liabilities — these liabilities are reasonably expected not to be liquidated within a year. They usually include issued long-term bonds, notes payables, long-term leases, pension obligations, and long-term product warranties.

Liabilities of uncertain value or timing are called provisions.

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