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Simple English definitions for legal terms
current liability
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A quick definition of current liability:
Current liability: A current liability is a type of debt that a company owes and needs to pay back within one year. This can include things like money owed to suppliers, short-term loans, money owed to shareholders, and taxes that need to be paid. Basically, it's money that a company needs to pay back soon.
A more thorough explanation:
A current liability is a financial obligation that a company is expected to pay off within one year. These are debts or obligations that are due in the short term, usually within the next 12 months.
Examples of current liabilities include:
- Accounts payable: Money owed to suppliers or vendors for goods or services received but not yet paid for.
- Short-term debt: Loans or other debts that are due within the next year.
- Dividends: Payments to shareholders that are due within the next year.
- Income tax: Taxes owed to the government for the current year.
These examples illustrate the definition of current liabilities because they are all debts or obligations that a company is expected to pay off within a short period of time, usually within the next year. Companies need to keep track of their current liabilities to ensure that they have enough cash on hand to pay off these debts when they become due.