Finance & Moneybeginner
Liability
Definition
Any financial obligation a business owes to others, including loans, unpaid invoices, taxes owed, and outstanding bills.
Why it matters
Liabilities reduce the net value of your business. Tracking them helps you understand true profitability and avoid overestimating how much money you actually have.
Example
A business owes £3,000 in unpaid invoices to suppliers, £1,500 in VAT due to HMRC, and has a £10,000 outstanding loan, total liabilities of £14,500.
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