There are assets, there are also liabilities. For those of you who are in the field of accounting and finance must be familiar with the term liability. In the balance sheet, liabilities represent the liabilities and capital of a company or business entity that are placed in the right or bottom position depending on its shape, scontro or staff. Pasiva shows the position of debt and capital owned by the company in carrying out its business activities. Then, what is meant by the liability itself?
Definition of a liability
Liability is defined as a sacrifice made by a company or business entity economically in an effort to support business activities in the future. The existence of this economic sacrifice, is expected to produce added value for business activities carried out by a company or business entity in the future.
In accounting and finance, liabilities are also called liabilities because they represent an economic sacrifice as a result of the existence of a business activity. This economic sacrifice refers to the meaning of the emergence of obligations in accounting consisting of current or short-term debt and long-term debt. Not only debt, liabilities also describe the company’s capital position both capital and capital obtained from loans or other parties’ debt.
Components in liability
Broadly speaking, liabilities consist of two main components namely debt (liabilities) and capital (equity) . Debt itself is divided into short-term debt which is also called current debt and long-term debt. Components in this liability apply to all types of companies or business entities, both bank and non-bank.
- Debt (liabilities)
Debt is a liability component that is placed in the upper position in a balance sheet. That is, this component was reported earlier than the capital component. Debt can be understood as any obligation that must be paid by the company to other parties for any transactions that have occurred in the past.
The debt component in liabilities is divided into two, namely current debt and long-term debt.
- Good debt (current liabilities)
Current debt is also called short-term debt, which is the obligation that must be paid or paid off as soon as possible. The period of validity of current debt or short-term debt is generally less or equal to one year.
- Long-term debt (long term liabilities)
Long-term debt is the opposite of current debt or short-term debt if viewed from the validity period or maturity. Long-term debt is a liability owned by a company whose payment or repayment has a relatively longer period of time. The long-term debt maturity is generally more than one year.
- Capital (equity)
The capital component in liabilities is reported after debt, so that its position is placed at the bottom of a balance sheet. Capital, also known as equity, is a company’s internal resources that are used to carry out business activities and increase wealth. The amount of capital reflects the level of wealth owned by the company. Capital is obtained by subtracting assets, that is, all assets with debts owned by the company.
Capital is obtained from the difference in total assets, that is, all assets with total liabilities or debt owned by the company. The results of this difference then become the right of the owner of the company.
Types of liabilities
Not only the main component, liabilities also have derivatives grouped into various types. Broadly speaking, the types of liabilities can be grouped according to the time period, namely current debt or short-term debt and long-term debt. While there is no type of derivative in the capital component.
- Debt smoothly
As stated earlier, current debt is also called short-term debt or obligation. All types of debts whose payments or repayments must be made before or no later than one accounting year, including the type of current debt. Current debt or short-term debt includes the following types of accounts.
- Accounts payable (accounts payable) is a type of debt incurred as a result of purchases of goods, raw materials, or otherwise in connection with the operation of business activities of the company with partner suppliers (suppliers) .
- Debt notes (notes payable) is a type of debt that must be paid by the company to those who never give a loan within 30 to 90 days.
- Accrued interest payable is costs that have not been paid or paid by the company during the accounting period, such as rent, wages, salaries, and other costs.
- Unearned revenue is a form of liability that arises as a result of the company having received payment before the obligation for goods or services that are the right of another party is given or realized.
- Salaries payable is a form of liability that has to be paid by the company to employees that have not been approved.
- Dividend debt (dividend payable) is part of the company’s profits that should be given to shareholders but have not been paid to those who are entitled to receive it when the balance sheet has been prepared.
- Tax debt (tax payable) is the entire tax liability arising on all company assets, especially buildings that have been exploited for the benefit of the company’s operations.
- Long-term debt
Long-term debt includes all types of debt with a relatively long period of payment or repayment, which is more than one year. Some accounts are classified into types of long-term debt, which are as follows.
- Bank debt (bank loan) is a loan obtained from a bank that is used as working capital for a company. This type of debt is generally used for the benefit of strategic companies such as the expansion or acquisition of other companies.
- Debt mortgages (mortgages payable) is a type of loan which the company submitted to the bank by making its fixed assets as collateral.
- Bond debt (bonds payable) is an obligation that arises as a result of the issuance of securities in the form of debt securities or bonds made by the company. The bonds themselves can be understood as debt securities in which the company owes to other parties who buy the bonds. The party that buys the bonds means giving a company some money as a loan. Consequently, companies must provide periodic interest which is also called the coupon to bondholders until the payment due date arrives.
- Noveltasi (long term loan) is a type of debt obtained from banks or other financial institutions with a long credit period or period.
- Subordinated debt (subordinated loan), which is a liability of the company to the shareholders of the parent company that is of no interest.
- Debt Long-term lease (long term liabilities lent) an obligation of the company that still have to be paid or repaid in a relatively long time span.
- Debt lease ( debt leasme) is a type of debt sourced from foreign companies to be used to buy fixed assets whose payments are repaid in a fairly long period of time.