What Is a Liability?
A liability is an obligation to pay an asset in the future. It is also known as debt. For example, Big Dog’s bank loan represents an obligation to repay cash in the future to the bank. Accounts payable are obligations Total assets ($22,100) always equal total liabilities ($10,100) plus shareholders’ equity ($12,000). The heading shows the name of the entity, the type of financial statement and the point-in-time date. CHAPTER ONE / Introduction to Financial Accounting 11 to pay a creditor for goods purchased or services rendered. A creditor owns the right to receive payment from an individual or business. Unearned revenue represents an advance payment of cash from a customer for Big Dog’s services or products to be provided in the future. For example, Big Dog collected cash from a customer in advance for a repair to be done in the future.