What are Current liabilities?

Current liabilities (Definition)

Current liabilities refer to any short-term financial obligations due to be paid within one year or within a normal business operating cycle. These generally refer to any accounts payable (amounts you owe to suppliers), payroll, money due on short-term loans (credit cards), or income taxes owed, dividends payable, deferred revenue (prepayments from customers for work not yet completed or earned) and interest payable on any outstanding debts such as loans.

Current liabilities are usually paid down using current assets available. It is important for your business to understand the ratio of current assets to current liabilities as it helps to understand the ability of the business in paying all debts as they become due.