Current liabilities are obligations which a company must satisfy either over the next 12 months or within one operating cycle.

Common current liabilities include trade payables, financial liabilities, accrued expenses, and deferred income.

Trade payables

Trade payables (also called accounts payable) are amounts that a company owes to its vendors. A study of the overall level of accounts payable relative to purchases/COGS is useful in assessing any changes in a company’s credit relationship with suppliers.

Financial liabilities

Financial liabilities include borrowings such as bank loans, notes payable, commercial paper, etc. which original maturity of less than one year. These also include a portion of long-term loans and bonds which are due within one year.

Accrued expenses

Accrued expenses (also called accrued liabilities) are expenses that have been recognized in the income statement but not yet paid. Examples include accrued interest payable, accrued employee compensation, etc.

Deferred income

Deferred income (also called deferred revenue or unearned revenue) represents payment received in advance for goods and services yet to be delivered. Examples include lease payments received at the beginning of a lease, etc.

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