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Liabilities indicate the future obligations arising due to any services or goods availed in past. It is the probable sacrifice of economic resources to the service providers as a result of transactions that occurred in past.

Current liabilities include obligations such as accounts payable, interest payable, salaries and wages payable, etc., which are required to be paid within a year or within an operating cycle, whereas in the case of long-term liabilities, these are paid in long term say three years.

The expense which has been incurred but not paid in cash by the entity is the current liabilities.

The present value of future cash flows for the liabilities is used to report the value of liabilities. Current liabilities are valued at maturity or face value.

In the balance sheet, liabilities are reported on the basis of the sequence of settlements at the time of liquidation. When business is in process of closing or liquidation, notes payable are probably settled first, hence reported first in sequence under the current liabilities section.

The liabilities related to employees are salaries and wages earned by them, accrued bonuses or incentives, benefits related to the post-retirement, and the expenses related to compensated absences.