In the last lesson, we talked about assets - which represent things you own like cash, equipment, vehicles. Now let's talk about liabilities, the stuff you owe. Also referred to as debt.

Textbook Definition: Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word "payable" in the account title. Liabilities also include amounts received in advance for a future sale or for a future service to be performed. 

Definition You Need to Know: Liabilities are monies that you owe other people, whether that be a bank, a credit card company, an employee, an angel investor, or a client who has prepaid you for services.

If you're thinking about your personal life and what liabilities you have, think of things like your credit card balance, your mortgage, your car loan and any bills that you haven't paid yet. These are all liabilities.

And whether thinking about your personal life or your business, liabilities are a very important part of the accounting equation ASSETS = LIABILITIES + EQUITY.

Where are they on my financials? Liabilities show up on the balance sheet.