When a business owes something to third party against the benefits derived by the business from that third party, the business is said liable. The amount by which the business is liable is called the liability. Liability means that something remains to be paid by the business to third party to fully settle his account. The liability may be in the form of a bank loan or it may arise due to credit purchase.
The liability payable within the next 12 months like amount payable to creditors, short term loans, bank overdraft.
LONG TERM LIABILITY
The liability which is payable after 12 months is called long-term liability such as Term finance certificates , a bank loan payable after 2 years or more.