Accounting: Short-term and Long-term Liabilities

It’s important to know whether accounts showing amounts owed by the company should be posted as short-term or long-term liabilities.  Both short and long-term liabilities appear on the Balance Sheet which is often used to assess the financial health of a company. Accurate posting is critical to the many ratios that investors and potential lenders use to determine the strength and value of a company.

Short-term liabilities are liabilities that will be paid within one year.  Here are some examples of short-term liabilities:

  1. Accounts payable
  2. Notes payable if paid within one year
  3. Income taxes payable
  4. Interest and dividends payable
  5. Accrued liabilities
  6. Unearned revenues
  7. Wages payable
  8. Machinery and equipment lease that will be paid within one year

Long-term liabilities are liabilities that will be paid later than one year.  Here are some examples of long-term liabilities:

  1. Lease on machinery or equipment
  2. Notes payable if paid later than one year
  3. Bonds payable
  4. Bank loans if paid later than one year
  5. Building lease

Note that on some long term accounts, such as leases, the current 12 months will appear as short-term and only the part beyond 12 months will be classified as long-term.

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