In essence, the liability is any property from which you may lose money in the future. In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
A liability is defined by the following characteristics:
Any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time;
A duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services, or other transaction yielding an economic benefit, at a specified or determinable date, on occurrence of a specified event, or on demand;
A duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement; and,
A transaction or event obligating the entity that has already occurred.
This fun education game may answer some of the following questions:
1. What is Liability?
2. What are passives?
3. What are the liabilities?