What is a liability?

In a nutshell

A liability is a debt or obligation that a company owes to another party. Liabilities represent demands or claims on a company’s assets. They’re e an essential component of a balance sheet in providing a snapshot of a company’s financial health.

Examples

• Loans (e.g., the company takes out a bank loan)
• Accounts payable (e.g., an IT company hires contractors)
• Wages
• Taxes payable.
• Office rent
• Software subscriptions (e.g., Office 365, Photoshop, etc).

Sources

• Liabilities – Investopedia