Current Liabilities | Complete Guide

Current debts appear at the beginning of the liabilities section of the balance sheet. The definition of current liabilities are debts due within twelve months. These are typically trade accounts and short term loans.

Current debts are important for understanding the financial health of a company. If you compare the current assets to the current debts you know how easily the company will be able to pay its expenses in the coming year.

The formula for the current ration is current assets / current liabilities = current ratio. The current ratio of a healthy company will be above 2. This means that the company will have little to no problem paying its short term debt over time.

Current Liabilities Examples

Financial Institutions

Current Debt for financial institutions are not defined as a category on the balance sheet but do exist in these forms.

  • Customer Deposits
  • Travelers Checks
  • Accounts Payable
  • Short term Borrowing

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