The debts and obligations shown on a company's balance sheet are its liabilities. They are the inverse of assets. Liabilities reduce a company's total value because they represent debts that must be paid over time. Debt can take many forms, including business expenses, loans, unearned revenues, and legal obligations.
A balance sheet will typically include two types of liabilities:
Current liabilities that must be paid off within a year
Long-term liabilities that can be paid off over a period of more than a year

Liabilities refer to financial obligations or debts that a business or individual owes to others, which must be settled in the future. They are categorized as either current liabilities (due within one year, such as accounts payable, short-term loans, and accrued expenses) or long-term liabilities (due after one year, like mortgages, bonds, and lease obligations). Liabilities are a key component of a company's balance sheet and impact its financial health. While some liabilities, like business loans, can support growth, excessive debt may lead to financial strain. Proper liability management ensures solvency and creditworthiness. For individuals, liabilities include mortgages, car loans, and credit card debt. Managing liabilities responsibly is crucial for maintaining financial stability and avoiding insolvency.