What are company liabilities?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The main accounting document used to evaluate the performance of any company is the balance sheet. Its main principle is to maintain a balance between asset and liability. The structure of the balance sheet depends on the field of activity of the enterprise, but is formed according to the general principle: on the left side - assets, on the right side - liabilities. Rows with the corresponding serial number reflect individual articles. It is on their basis that the analysis of the company's activities is carried out. What are liabilities and assets of the balance sheet, any person related to the economic sphere must know.

Balance

To evaluate the activities of an enterprise, management, credit institutions, owners, shareholders, fiscal state bodies use the main accounting document - Form No. 1 of any reporting. The balance sheet reflects all property, liabilities, capital, cash and working capital of the organization for a certain period. The monetary value of each article makes it possible to analyze the assets and liabilities of the organization. The principle of equilibrium, regulated by double entry, ensures the balance of the two sides of the balance sheet, each of which is systematized by type of liquidity of funds. What are liabilitiesenterprises, you can find out from the right side of the table, for this you need to study its structure.

Regulatory acts (Tax Code) fixed the standard form of the balance sheet, its sections and prescribed the procedure for filling each article. To decipher this reporting form, there are additional appendices that reflect specific information on each type of assets or liabilities and capital. Required details to fill out:

- name of the organization (full, written in the statutory documents);

- corresponding codes (TIN, OKVED, OKEI, OKOPF, OKFS);

- date of compilation and submission to the tax authorities;

- registration address of the organization.

Balance structure

What are liabilities? Firstly, these are the funds reflected on the right side of the balance sheet. The liability has three main sections:

1. Current liabilities.
2. Long-term liabilities.
3. Capital and reserves. Each line or element of the liability reflects the funds of the enterprise, at the expense of which the active part of the balance sheet is formed.

The question of what liabilities are can be answered very simply - the capital of the organization. It may consist of borrowed funds (short-term or long-term obligations) or own funds (share, reserve, additional capital, retained earnings of the previous period.). What is an asset? These are objects and means of production.

The structure of the left side of the balance is as follows:

1. Non-current assets.
2. Current assets.

In each section, articles are listed in order of highest liquidity. All balance indicators are given in the table at the end and beginning of a certain reporting period, which facilitates visual analysis at the time of compilation. To conduct a comprehensive study of the organization's activities, an asset, like a liability, has applications (decoding) for each article.

What are liabilities

The right side of the balance reflects all sources of formation of the company's assets. In sum, these indicators give a liability, which in monetary terms shows the balance sheet currency. It is necessarily equal to the active part, i.e. the left side of the table. Translated from Latin, the word "passive" means "inactive". In fact, this type of enterprise resources is used to create assets, means of production, working capital, intangible and basic pieces of equipment involved in a closed production cycle. Under the concept of "liabilities" are suitable all types of capital of the organization, depending on the form of its organization (stock, statutory); financial liabilities of different periods (loans, credits, bills) and own funds accumulated in the form of various funds (amortization, reserve) (the amount of retained earnings for previous periods).

In accounting terminology, the term "total capital" is often used, this concept is identified with a liability and its currency. Also the right sidebalance sheet in various sources may appear as the "obligations" of the enterprise.

Structure of liabilities

All liabilities of an enterprise are classified as follows:

- Imaginary - such liabilities are reflected in accounting or tax accounting on a certain date to calculate the value of net assets, but are actually repaid. Their timely identification will help to avoid double payments, i.e., to preserve current enterprises without reducing their value. Imaginary liabilities include: funds received as a loan from the owner of the company, reserves for future payments, debts of creditors that have expired and others.

- Hidden - liabilities that are actually absent, but reflected in the composition of credit, tax or extra-budgetary payments. They can arise in the process of compiling the balance sheet in case of untimely write-off (reflection) of the listed debts in the accounting records. Hidden liabilities include: deferred tax liabilities, charitable transfers, ineffective contracts or non-productive infrastructure facilities, repayment of debts of branches or subsidiaries (when incurring relevant obligations) and others.

- Actual - actually existing and reflected in the balance of liabilities. They, in turn, are divided into current and long-term obligations to credit institutions, budgets of various levels, employees of the organization, founders or shareholders. The maturity of a liability is determined by their maturity date, which depends on the relevantcontracts. When fulfilling actual obligations, the organization loses part of its own asset, which can be cash, fixed or working capital, finished products, etc.

What are current liabilities

Any commercial or government organization attracts borrowed funds to carry out its activities. Obligations that are due within a calendar year are called current obligations. They are reflected in the liabilities side of the balance sheet, in the "Current liabilities" section. As a rule, they are fully secured by the availability of liquid assets on a specific date. Current liabilities include: wage arrears to employees, obligations to the budget, short-term loans, credits and loans, debts to suppliers of raw materials, materials and equipment (within the limits stipulated by the contract). In order to understand what current liabilities in the balance sheet are, you need to refer to the lines of the fifth section "Current liabilities". It groups the following accounts: 66, 60, 62, 75, 70, 69, 68.

What are long-term liabilities

For large-scale financial projects, organizations raise borrowed funds for a long period. Their large specific gravity implies partial extinction over a long period of time. Long-term liabilities, or liabilities, are loans, loans, loans received for a period exceeding one year. They also include bills of exchange andbonds issued by the company. As a security for this category of liabilities, a credit institution, as a rule, accepts non-current assets of the enterprise. For the term of repayment of the loan, they are pledged, but at the same time they continue to participate in the production processes.

Bank liabilities

The accounting methodology of a credit institution differs from the rules regulated by the Tax Code for other business entities. Therefore, it is worth dwelling separately on the question of what a bank's liability is. Capital is the main instrument for carrying out the activities of credit institutions. It is he who is a liability, the value of which is the currency of the bank balance. The higher this value, the more effectively these funds are used. Each organization seeks to increase its liabilities at the expense of its own and borrowed funds. The composition of bank capital includes: authorized capital, income from the issue of securities, deposits of legal entities and individuals, profit from activities.

Liability analysis

The balance sheet is used to evaluate the company's liabilities and capital. The most common form of liability analysis is the study of its structure. Estimation of the mass fraction of long-term and short-term liabilities in its composition. At the same time, the number of liquid assets that can serve to pay off debts in the reporting period and on a long-term basis is considered. The positive dynamics of liabilities is the presence of a large amount of own capital in the balance structure. A serious warning toThe management of the company when analyzing liabilities is a large proportion of long-term liabilities, loss from activities, the presence of overdue accounts payable.