Liability 101757 225565011 2008-07-14T09:50:18Z Da monster under your bed 2040962 rv test edits {{redirect|Liable|"Libel"|Libel (disambiguation)}} {{TOCright}} In the most general sense, a '''liability''' is anything that is a [[wikt:hindrance|hindrance]], or puts individuals at a disadvantage. ==Accounting liability== In [[financial accounting]], a '''liability''' is defined as an ''obligation'' of an entity arising from ''past'' transactions or events, the settlement of which may result in the transfer or use of [[assets]], provision of services or other yielding of economic benefits in the future. Individual or group must adopt corporate charter and file it with the state. *They embody a duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services or other yielding of economic benefits, at a specified or determinable date, on occurrence of a specified event, or on demand; *The duty or responsibility obligates the entity leaving it little or no discretion to avoid it; and, *The transaction or event obligating the entity has already occurred. Liabilities in financial accounting need not be legally enforceable; but can be based on equitable obligations or constructive obligations. An '''equitable obligation''' is a duty based on ethical or moral considerations. A '''constructive obligation''' is an obligation that can be inferred from a set of facts in a particular situation as opposed to a contractually based obligation. The [[accounting equation]] relates [[asset]]s, '''liabilities''', and [[ownership equity|owner's equity]]: :Assets = Liabilities + Owner's Equity The accounting equation is the mathematical structure of the [[balance sheet]]. The Australian Accounting Research Foundation [http://www.aarf.asn.au/] defines liabilities as ''future sacrifice of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions and other past events.'' Probably the most accepted accounting definition of '''liability''' is the one used by the [[International Accounting Standards Board]] (IASB). The following is a quotation from IFRS Framework: {{quotation|A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits|F.49(b)}} Regulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU. ===Classification of accounting liabilities=== '''Liabilities''' are reported on a [[balance sheet]] and are usually divided into two categories: *'''[[Current liabilities]]''' &mdash; these liabilities are reasonably expected to be liquidated within a year. They usually include payables such as [[wage]]s, [[account]]s, [[tax]]es, and [[accounts payable]]s, unearned revenue when [[adjusting entries]], portions of long-term bonds to be paid this year, short-term obligations (e.g. from purchase of equipment), and others. *'''[[Long-term liabilities]]''' &mdash; these liabilities are reasonably expected not to be liquidated within a year. They usually include issued long-term [[Bond (finance)|bonds]], notes payables, long-term [[lease]]s, [[pension]] obligations, and long-term product [[warranty|warranties]]. Liabilities of uncertain value or timing are called provisions - see [[Provision (Accounting)]]. ===Bank account example=== Money deposited with a bank becomes a liability of the bank, because the bank has an obligation to pay the depositor the money deposited; usually on demand. (The money deposited is an [[asset]] for the depositor; but this asset will not be recorded by the bank because it is not the bank's asset. If the depositor maintains accounting records separate and apart from the bank account maintained by the bank, only then will the asset be recorded.) A [[debit]] increases an ''asset''; and a [[Debits and credits|credit]] decreases an ''asset''. A [[debit]] decreases a ''liability''; and [[Debits and credits|credit]] increases a ''liability''. When a bank receives a deposit it credits a liability account called "Deposits" and credits the depositor's bank account for the same amount (the bank's "Deposits" account is the sum of all of the amounts credited to all of its customer's individual bank accounts). A deposit received by a bank is credited because the bank's liability to its customer, the depositor, increases. When a bank informs its depositor that it has debited the depositor's bank account, it means that the depositor's bank account has been decreased by the amount debited. ==Legal liability==<!--This section is linked from [[Insurance]]; Redirected from [[Legal liability]]--> *In [[law]] a '''legal liability''' is a situation in which a person is liable, such in situations of [[tort]] concerning [[property]] or [[reputation]] and is therefore responsible to pay compensation for any damage incurred; liability may be [[Civil law (common law)|civil]] or [[Criminal law|criminal]]. See [[Strict liability]]. Under [[English law]], with the passing of the [[Theft Act 1978]], it is an offense to dishonestly evade a liability. Payment of [[damages]] usually resolved the liability. [[Vicarious liability]] arises under the common law doctrine of [[agency (law)|agency]] – ''[[respondeat superior]]'' – the responsibility of the superior for the acts of their subordinate. *In [[commercial law]], [[limited liability]] is a form of business ownership in which business owners are legally responsible for no more than the amount that they have contributed to a venture. If for example, a business goes [[bankrupt]] an owner with limited liability will not lose unrelated assets such as a personal residence (assuming they do not give personal guarantees). This is the standard model for larger businesses, in which a shareholder will only lose the amount invested (in the form of stock value decreasing). For an explanation see [[business entity]]. *'''Manufacturer's liability''' is a legal concept in most countries that reflects the fact that producers have a responsibility not to sell a defective product. See [[product liability]]. ==See also== {{Wiktionary}} *[[Accrued liabilities]] *[[List of accounting topics]] *[[List of business law topics]] *[[Liability insurance]] *[[Contingent Liabilities]] *[[Limited partnership]] *[[Stockholders' deficit]] *[[Public liability]] * [[Model Audit]] ==External links== *[http://www.publicliability.net.au Liability resources, case history, checklists, news and general risk management] [[Category:Tort law]] [[Category:Generally Accepted Accounting Principles]] [[Category:Core issues in ethics]] [[ca:Passiu (economia)]] [[da:Passiv (regnskab)]] [[de:Passiva]] [[es:Pasivo]] [[fr:Passif (comptabilité)]] [[hr:Pasiva]] [[id:Kewajiban]] [[lt:Pasyvas]] [[hu:Forrás (számvitel)]] [[nl:Passiva]] [[ja:負債]] [[pl:Pasywa]] [[pt:Passivo]] [[ro:Pasiv (contabilitate)]] [[ru:Пассив]] [[zh:負債]]