Liability - GCSE Business Definition

Liability refers to a company's legal obligations or debts that arise during the course of its operations. It represents an expectation to deliver services or repay amounts owed to other organisations or individuals in the future. In GCSE Business, liabilities can include loans, mortgages, and any money that the business owes to suppliers, creditors, or even employees in the form of unpaid wages. Liabilities are recorded on the balance sheet and are categorised as either current, needing to be settled within one year, or non-current, which are long-term obligations due after one year. Understanding liabilities is crucial because they impact a business's financial health and cash flow management.