Total Liabilities
Total liabilities consist
of current liabilities and long term liabilities. Current liabilities are the
liabilities that the firm is to pay in the current year where long term
liabilities like bonds payable, mortgage payable, long-term notes payable,
lease liabilities, and pension liabilities those the firm is to pay after one
year or after the current financial year. This is presented in the balance sheet side by side with total assets to show exact financial picture of an
organization.
Importance of Total Liabilities
Every firm must correctly
and precisely calculate its total liabilities to compare those liabilities with
assets outstanding currently. This also helps compare total liabilities in
previous years and total liabilities of its competitors. This is also an
important indicator of future performance of the organization.
Total Current Liabilities
Total current liabilities
are the obligations that the organization is to pay within the coming year.
Most common forms of current liabilities are accounts payable, wages payable,
bank loan payable, interest payable, and taxes payable. Summation of all these
current liabilities will be total current liabilities. Current maturities of
long-term obligations are also included in the total current liabilities. This
is included under total liability of balance sheet.
Importance of Total Current Liabilities
Total current liabilities
are used to find out current ratio which helps us to know the company’s ability
to pay all the current obligations with the current assets the company
currently holds. Having more current liabilities indicate that the firm is not
efficient in managing its liabilities properly where the firm must maintain
more carefully to sustain in the market. Current ratio facilitates comparison
of the firm’s ability to pay current obligations with that of its competitors.
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