Liabilities are legally binding obligations
that are payable to another person or entity. Settlement of a liability
can be accomplished through the transfer of money, goods, or services. A
liability is increased in the accounting records with a credit and decreased with a debit.
A liability can be considered a source of funds, since an amount owed
to a third party is essentially borrowed cash that can then be used to
support the asset base of a business. Examples of liabilities are accounts payable, accrued liabilities, deferred revenue, interest payable, notes payable, taxes payable, and wages payable.
