Liabilities refer to the monetary obligations a company may have that are payable to a different party. Liabilities are legally binding and may include employee wages and benefits, taxes, insurance, accounts payable and any expenses accrued through regular operation. To define liabilities, a company must account for all debts, current and long-term, as well as monies received in advance in exchange for future transactions.
Liabilities are settled by means of cash or cash equivalent transfers to the owed entity. This liabilities definition, accounting for any expenses a business may incur, is useful in completing balance sheets and company evaluations.