Liabilities

Liabilities reflect the sources of funding of the entity (e.g. the company): identify where the funds that the entity used to purchase its assets came from. They can be liabilities, which the entity must repay, or equity, representing the owners' investments. Liabilities are classified in the balance sheet as either short-term or long-term depending on when the entity has to pay them. Short-term liabilities (current liabilities) are repayable within one year and long-term liabilities have a term of more than one year.