Liabilities are shown in the Balance Sheet on the left - hand side . They may be divided as follows :
1. Non - Current Liabilities : These liabilities are those liabilities which are not payable by the business in the next year . They mainly include long - term loans , borrowing or debentures , etc . Funds from this source are used for acquiring fixed assets .
2. Current Liabilities : These liabilities are payable by the business within a year . Examples are trade creditors , bills payable , expenses outstanding , bank over - draft , etc .
3. Owners Funds : The amount owing to the proprietors as capital is a class by itself .It includes undistributed and reserves besides capital . It is equal to the net assets of the business and is defined as the difference between assets and liabilities .
Contingent Liabilities :
Contingent Liability is a liability that becomes payable on the happening of an event . In case , the event does not happen , on amount is payable .Such liabilities are not accounted and are not shown in the Balance Sheet; they are disclosed by way of a note . Examples of contingent liabilities are :
1.Liabilities in Respect of Bills Discounted : If the firm got its bills receivable discounted with bank , the primary liability will be that of the acceptor . If the acceptor does not pay , then it becomes firm's liability .
2. Guarantee for Loan : If the firm has stood surety for a loan , it will be liable to pay the amount if the other person fails to meet his obligation .
3. Disputed Claims : If some other party has lodged a claim against the firm , the firm will be liable to pay if the claim succeeds .
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