What is a Short-Term Liability?

A short-term liability is a financial obligation that is to be paid within one year. This type of liability is classified within the current liabilities section of an entity’s balance sheet . Examples of short-term liabilities are as follows:

• Trade accounts payable . Includes all billed liabilities owed to the suppliers of a business.

• Accrued expenses . Includes all unbilled liabilities owed to the suppliers of a business.

• Taxes payable . Includes all taxes payable to the applicable government entities; examples are sales taxes and use taxes.

• Dividends payable . Includes all dividends declared by the board of directors, but not yet paid to shareholders.

• Customer deposits . Includes deposits received from customers for goods or services not yet delivered to them.

• Short-term debt . Includes all debts owed by the business that are payable within one year.

• Current portion of long-term debt . Includes that portion of an entity’s long-term debts that are payable within one year.

• Other accounts payable. Includes all other obligations of the business that are not included in the preceding list of liability accounts.

Presentation of Short-Term Liabilities

All short-term liabilities are presented within the current liabilities section of the balance sheet. A sample presentation appears in the following exhibit.