Skip to content

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Liabilities definition

What are liabilities in accounting?

Liabilities are the debts and obligations that detract from a company’s total value, which have to be paid over a certain period of time. The form of the debt can vary – common examples include business expenses, loans, unearned revenues or legal obligations.

Discover more about technical analysis

Learn how technical analysis can help you find the right time to enter and exit a trade.

Current vs long-term liabilities

There are two main types of liabilities that will be present on a balance sheet. These are:

  1. Current liabilities, which must be paid off within one year. These include taxes, monthly accounts and employee salaries
  2. Long-term liabilities can be paid off over more than one year. These include bonds, vehicle payments, loans, etc.

What is the relationship between liabilities and assets?

The relationship between liabilities and assets is that the former often pays for the latter. A company can either pay for its assets using loans (liabilities), or shareholder investments (equity). This can be explained with a simple accounting equation.

While assets add value to a company, liabilities detract value because they are owed to another party – they can include loans and monthly utilities.

Example of liabilities

Say a company has a total of $111,000 in assets and $49,000 in liabilities – it will be broken down on a balance sheet as per the example below.

Example of liabilities

Because the company has more assets than liabilities, it can mean one of two things: either it has enough revenue to pay for the other assets itself, or the assets are funded via shareholder equity.

Build your trading knowledge

Discover how to trade with IG Academy, using our series of interactive courses, webinars and seminars.

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - Y

See all glossary trading terms

Help and support

Get answers about your account or our services.

Get answers

Interested in opening an account with us? Call 0800 195 3100 or send an email to newaccountenquiries.uk@ig.com.

We’re available from 8am to 6pm (UK time), Monday to Friday

Want to check on your application’s progress? Email us at newaccounts.uk@ig.com.