A liability is anything a company owes to someone else — money, goods, or services. Liabilities represent the company's obligations that must be settled in the future, usually through cash payments.
Liabilities are divided into current liabilities (due within one year — accounts payable, wages, short-term loans) and non-current liabilities (due after one year — long-term loans, bonds, lease obligations).
On the balance sheet, liabilities sit alongside equity on the right side of the accounting equation: Assets = Liabilities + Equity. A company with too many liabilities relative to assets may face solvency issues.