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Debt Vs Liability


As an integral part of balance sheet, based on classification, all debt is classified as liabilities, but not all liabilities are debt, for example, accrued future warranty costs is not a debt, but rather an estimate of a future liability.

Liability is when you borrowed money or any amount owed to another. This may includes regular long term or short term bills, for instance amount due for electricity bill that has been received, but not yet paid.

Debts are specific type of liability that includes borrowed money such as a loan, mortgage. Debt arises when a company lends money from another party in order to raise funds and it is to be paid back at some future date. On the other hand, liability arises when financial obligations are required for a business to function or for business processes to work.

Posted by: IMOH Umana, 2020-04-19 00:56:57 Posted In Business
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In business, the term "liability" refers to any amount that a company owes to someone else for any reason. Liabilities include money owed due to borrowing activities as well as other financial obligations, such as the amount the company owes to vendors for supplies it has purchased and to workers for services performed. Another example of a liability is a promise a company makes to provide goods or services in the future. For instance, when a customer buys a gift card, the company gains a liability because the company essentially owes the customer a certain amount of goods or services in the future.

Posted by: Ahmad Suleiman, 2020-04-23 00:07:13
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This are good and clear examples to distinguish between depth and liability. All dept are liability but not all liability are dept.

Posted by: Daniel Mathew, 2020-05-07 12:02:50
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