Liabilities for Dummies

Question

Liabilities for Dummies

noun

pronunciation: ,laɪʌ'bɪlʌtiz

What does Liabilities really mean?

48 1

Revised and Fact checked by Ava Clark on 2023-10-29 01:33:13

Detailed info

Liabilities In a sentece

Learn how to use Liabilities inside a sentece

Liabilities are the money that a company owes to others.
When you borrow money from a bank to buy a car, the loan becomes your liability until you repay it.
If you accidentally break your friend's phone, fixing or replacing it becomes your liability.
When you rent a house, paying the monthly rent becomes your liability.
If you promise to do someone's homework and fail to deliver, it becomes your liability to make it up to them.

Word Category

Liabilities Hypernyms

Words that are more generic than the original word.

possession

Liabilities Hyponyms

Words that are more specific than the original word.

accounts payable charge debt deficit payables tax liability

Liabilities Usage Of

Words that the original word is a domain usage of.

plural plural form

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score 48 · Accepted Answer

Liabilities is a word that we often come across when dealing with money and finances. It refers to the things that a person or a company owes to others. Liabilities can include things like loans, debts, outstanding bills, or any other financial obligations that need to be repaid.

Imagine you have a piggy bank filled with money. If you borrowed some money from your friend and didn't pay it back yet, that unpaid amount becomes a liability for you. Similarly, if a company borrows money from a bank to expand its business, that borrowed money becomes a liability for the company.

Now, liabilities can be short-term or long-term. Short-term liabilities are the ones that need to be repaid within a year, like a credit card bill or utility payments. Long-term liabilities, on the other hand, are the ones that need to be repaid after a year or more, such as a mortgage or a student loan.

Liabilities can also be categorized into current and non-current liabilities. Current liabilities are the ones that need to be settled within a year, just like short-term liabilities. Non-current liabilities, as you can guess, are the obligations that need to be settled after a year or longer, just like long-term liabilities.

Let me give you an example. Imagine you decide to start your own lemonade stand. To set it up, you borrow $50 from your parents. Now, that $50 is a liability because you have to pay it back to your parents eventually. It's a short-term liability because you'll repay it soon.

Now, let's say you also take a loan from the bank to buy a big banner to attract customers. You borrow $500 from the bank, which becomes another liability for you. However, this is a long-term liability since you'll be paying it back over a longer period, let's say three years.

So, in a nutshell, liabilities are the financial obligations or debts that we owe to others. They can include both short-term and long-term obligations that need to be repaid within or after a year. It's important to keep track of our liabilities and manage them wisely to maintain financial stability and avoid getting overwhelmed with debt.