The liabilities are
differentiating into two types i.e. Current and Non-Current. The distinction is
made on the basis of time period.
a) Current Liability:
It is one which the entity expects to pay off within one year from the
reporting date.
b) Non-Current
Liability: It is one which the entity expects to settle after one year from the
reporting date.
Types and examples
Following are examples
the common types of liabilities along with their usual classifications.
|
Liability |
Classification |
|
Long Term Bank Loan |
Non-current |
|
Bank Overdraft |
current |
|
Short Term Bank Loan |
current |
|
Trade Payables |
current |
|
Debenture |
Non-current |
|
Tax Payable |
Current |
It may be appropriate
to break up a single liability into their current and non- current portions.
For instance, a bank loan spanning two years and carrying 2 equal installments
payable at the end of each year would be classified half as current and half as
non-current liability at the inception of loan.