Question

Name the different types of liabilities.

Answer 1

Liabilities are debts owed by the firm and payable in future. Liabilities are of the following types.

1. Fixed Liabilities: These are payable in the long run or on the termination of business. Share capital, debentures and long-term loans are some examples. 
2. Current Liabilities: These are repayable in near future, generally one year. Sundry creditors, bills payable, short-term loans and bank overdraft are examples. 
3. Contingent Liabilities: These liabilities become payable on the happening of particular events. If the events do not happen, these are not payable. For example, guarantee given by the firm on behalf of a borrower from a bank will become payable when the borrower makes default in payment.