Liabilities - Definition, Meaning, and Examples in English

Definition

^{Context #1 | Noun}

financial accounting

Liabilities are debts or obligations that a company owes to outside parties. These can include loans, accounts payable, accrued expenses, bonds, and other financial obligations.

Synonyms

debts, indebtedness, obligations.

Which Synonym Should You Choose?

Word	Description / Examples
liabilities	Used in formal financial and legal contexts to refer to all the amounts a company or person owes that must be paid. The company's liabilities exceeded its assets. We need to account for all liabilities in our financial statement.
debts	Refers to specific amounts of money that are owed or due from one party to another. He couldn't sleep because of his mounting debts. Paying off student debts can take many years.
obligations	Refers to duties or commitments, often financial, that someone is bound to fulfill. She felt a strong obligation to support her family. The loan comes with certain obligations you must meet.
indebtedness	Typically used in formal and legal contexts to discuss the state of being in debt, often significant in amount. The company's high level of indebtedness is a cause for concern. Indebtedness has become a major issue for the government.

Examples of usage

Companies must carefully manage their liabilities to ensure they can meet their financial obligations.
Long-term liabilities are debts that are due beyond one year.
Accounts payable is a common type of liability found on a company's balance sheet.

Interesting Facts

Finance

In accounting, liabilities are divided into current (due within a year) and long-term (due in more than a year).
The balance sheet of a company lists its liabilities alongside assets, showing the financial health of the business.
Common examples include loans, credit card debt, and unpaid bills, representing what a company needs to repay.

Legal Perspective

In law, a liability can arise from a contract, tort, or statute, holding a party responsible for their actions or inactions.
Liability insurance protects against claims resulting from injuries and damage to people or property.
Different jurisdictions may have varying laws that define or limit liabilities, emphasizing the importance of local legal systems.

Business Concepts

Startups often face high liabilities as they generally need to borrow money to fund initial growth.
Understanding liabilities is crucial for investors assessing a company's risks and overall value.
Managing liabilities efficiently is a critical skill for business owners, impacting long-term sustainability and profitability.

Psychology

The concept of personal liability can affect mental well-being, as owing money can lead to stress and anxiety.
Some studies suggest that people with high personal debt may experience changes in decision-making and risk assessment.
Perceptions of liability often differ culturally; some societies stigmatize debt while others view it as a part of business growth.

Origin of 'liabilities'

Main points about word origin

The term originates from the Latin word 'liabilitas', which means 'obligation or responsibility'.
In the 14th century, the word began to be used in English to describe the quality of being liable or responsible.
Liabilities are now a standard term in finance and accounting, encompassing loans, debts, and other financial obligations.

The word 'liabilities' originated from the Middle English word 'liabilite', which came from the Old French 'liable', meaning 'bound or obligated'. The concept of liabilities in accounting has been crucial for businesses to track their financial obligations and manage their debt effectively.

Word Frequency Rank

Ranking #3,939, this word is part of upper-intermediate vocabulary. While not among the most basic terms, it appears often enough to be valuable for advanced communication.

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Liabilities Meaning: Definition, Examples, and Translations