Debts due within a year — bills, cards, payroll, and sales tax collected.
Current liabilities are obligations due within a year: accounts payable, credit card balances, payroll liabilities, sales tax collected but not yet remitted, and the next twelve months of loan payments. Longer-dated debt is long-term.
The split matters because near-term obligations are what strain cash. Comparing current liabilities to current assets (cash, receivables, and other soon-to-be-cash items) shows whether the business can cover what's coming due — that cushion is working capital, and lenders look at it before lending.
A cafe owes $6,000 to suppliers, carries $2,500 on its card, holds $1,800 of collected sales tax, and owes $3,200 of payroll liabilities: $13,500 of current liabilities. Against $22,000 of current assets, it's comfortably covered.
Accounts Payable (A/P) · Working Capital · Balance Sheet — or browse the full plain-English glossary.
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