Introduction to Current Liabilities

What you will learn to do: Define current liabilities

Liabilities are obligations to pay cash, provide services, or deliver goods at some future time.

FASB’s Concept Statement No. 6, in place for more than 20 years, defines liabilities as “probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.”

Most balance sheets divide liabilities into current liabilities and long-term liabilities.

Let’s zoom in on The Home Depot balance sheet for the fiscal year ended February 2, 2020:

THE HOME DEPOT INC.
CONSOLIDATED BALANCE SHEET
in millions, except per share data February 2, 2020 February 3, 2019
Category, Liabilities and Stockholders’ Equity
Subcategory, Current liabilities:
     Short term debt $     974 $     1,339
     Accounts payable 7,787 7,755
     Accured salaries and related expenses 1,494 1,506
       Total current liabilities Single line
18,375
Single line
16,716
Long-term debt, excluding current installments Single line28,670 Single line26,807
Long-term operating lease liabilities 5,066
Deferred income taxes 706 491
Other long-term liabilities 1,535 1,867
          Total liabilities Single line
54,352
Single line
45,881
Single line Single line

 

Current liabilities are obligations that (1) are payable within one year or one operating cycle, whichever is longer, or (2) will be paid out of current assets or create other current liabilities.

Long-term liabilities are obligations that do not qualify as current liabilities.