What are liabilities?

In general, a liability means, a state of legally being responsible for something. The something refers to an amount of money owed.
Liabilities in general as classified as current liabilities or short-term liabilities and non-current liabilities or long-term liabilities.
Current liabilities: These are the liabilities which are paid back within a year or less than a year.
For a boutique business, Liabilities might be Accounts payable, income tax and short-term loans.

Account payable: If you bring a ton of cloth in advance from your supplier(industry), you are supposed to pay back money within a month or two. In other words, it is said that you are liable to pay back to the supplier.
Income tax: It is the amount of money which has to be paid to the Government from your earnings. Hence, you are liable to pay to the government from the earnings of your business.
Short-term loans: Suppose if you have to fix lights in your boutique all of a sudden, you will borrow money from your friends or bank or somewhere else.  You will use the money for fixing the lights and later you will return the money. Hence, on a balance sheet, it is written as a liability.

Non-Current liabilities: These are the liabilities which are paid back within more than a year.
For a boutique business, a loan borrowed from a bank is a liability. So, if the boutique borrows money from the bank, it has to pay back to the bank in five years along with the interest. Therefore, it is considered as Non-Current liabilities.
I hope you have enjoyed reading about the types of liabilities with respect to boutique business and I also hope this might have helped you to some extent.
The Capital in the balance sheet is categorized into different categories which will be explained in the next post.

Until then,
Have a great time 😊😊😊😊😊
Sneha Polapragada.  