Info 1: Current liabilities definition
Info 2: how its works
Info 3: Current vs non Current liabilities
Info 4: example of current liabilities
Opening information:
Current liabilities breaks into two words Current and liabilities, Current means on time period, liabilities means money which are owes by someone. Current liabilities means money which are need to paid in on time frame.
So now let’s have a look what is a Current liabilities, how the current liabilities works in the sock market, and what is the difference between the current liabilities and non Current liabilities, finally one brief example about the current liabilities.
Info 1: Current liabilities definition
Kalik is the business man who is the running restaurant business in a big city, when compared any other restaurants businesses with kalik restaurant, they made unique foods that’s same taste wouldn’t be made by anyone.
Where he bought the all food production materials from other business owner, which they are cost about 12 million dollars for the kalik restaurant but they made the payment for such items within 4 months. So they are considered the liabilities.
Next the kalik also had long term loans which are need to be paid in the next 30 years period, among the 30 years time the 1.6 millions dollars are must need to be paid in the current year.
Moreover kalik also pay interest for their bond holders up to half million dollars, where this also a long term bond too which are need to paid in 5 year.
Here the any kind of obligation to pay 12 millions, 1.6 millions dollars debts or payment or pending payment within a one year period is what known as a Current liabilities in the kalik restaurant industry.
So any of the organization Which are had any amount of debts to pay in one year is elaborate as Current liabilities of the one organization. Now let’s dive into know how the current liabilities works in the public market.
Info 2: how Current liabilities works
Current liabilities doesn’t represent any of the specific things or object, instead they are collection of all accounted debts which are payable under one year from the one particular Industry.
This accounted debts are the one which are marked and record by the balance sheet statement at the liabilities side section at a first part.
For the reason, the debts which are payables and closeable in one year, would be considered as a current liabilities of the one Company.
Supposed if the such debts are not payable within a twelve months periods then such liabilities are not named and record as Current liabilities of the one business.
Their is none of the items pre-determined are alone which are reported in the current liabilities, based on Industry each business had different and distinct kind of Current liabilities which are payable in one year period.
Mostly the common liabilities for any kind of business are Account payable, accrued expenses, Current
Portion of long term debts, income tax payable, Notes payable, wages payable, interest payables, warranty liabilities extra…
If any of the company which are used to pay the other business within a pre-determined time, then such payment of debts which are owes from the other people’s or firm are accounted in the current liabilities because which are need to be pay in the one year time frame.
Next the things which are happening as spending on the daily basics of the business at any time which are accounted and tracked at every day, that spending are noted in the current liabilities as accrued expenses or wages expenses.
Any amount kind of debts which are illustrated as paid in the one year or need to pay in year for any third party are said as a Current liabilities.
Most of the people’s confuse the Current liabilities and non Current liabilities, so let’s jump into know the key in it anyway.
Info 3: Current vs non Current liabilities
The difference between the Current liabilities and non Current liabilities are, Current liabilities refer the all the kind of accounted debts or loan which are not payable based on the business but based on the does the loan need payable in one year or not.
On the other side, non Current liabilities are not a assets despite they are loans and debts which are need to be payed in the long term basic by due the payment for more than a 12 months periods.
To make you more clear about the current liabilities and non Current liabilities, let’s seen into one clear example below.
Info 4: example of current liabilities
Say the company H are the one which had two kind of debts which one is about paying the bank loans within a next 8 years, and the next debts about paying 2.3 millions dollars for such loan in the current year.
Here the interest amount of 2.3 Million dollars of 8 year bank loan is categorized in the current liabilities, and the full principal loan payment of 8-year loan is what is separated as a non-Current liabilities.