loans and liability

Loans and Liability in Balance Sheet

Definition of Loan and Liabilities in Balance sheet

What are loans and liability? Liability is the responsibility of any person or company that he has to pay in a given time. In simple language, when a company or person borrows any loan or thing from any person or institution for their needs, then it becomes the responsibility of the person to return the loan taken and this liability is called liability. . Liabilities are of two types, current liability and long-term liability, which are shown on the right side of the balance sheet. All types of liabilities and assets are shown in the balance sheet.

Understanding Loan and Liabilities in Balance sheet

 It is not difficult to explain loan and liability. Where loan means loan and liability means responsibility. It simply means that the loan or thing taken by any person or institution, in return for which he has to pay it with interest in the coming time. Let us understand this with the example of computer. Suppose a person purchased a fixed asset worth Rs 200,000/- from a company. An interest of Rs 20,000/- was added by the company on that Rs 200,000/-. So now the person has to pay a total of Rs 220,000/- to the company in 2 years.

So it becomes the liability of the person to return that money to the company. When a person enters these assets in his tally books, he has to put the ledger of the company in the loan and liability group. This loan is called long-turn loan for the individual as its time limit is more than one year. If this loan is taken by the person for one year then it would be the current liability of the person.

Types of Liabilities in tally accounting

There are two types of liability in any business, current liability and long-turn liability. Current liability includes all those liabilities, which have to be paid by a company to a person within one year. But long-term liability includes all those liabilities which the company has to pay in more than one year. The long-term liability can be of 2 years or even 15 years. You can include sundry creditor, short-term loan in current liability and bank loan, home loan, car loan all those loans are included in long-term liability. Let i tell you what are the examples of loan and liability in tally.

Example of current liability in tally

1. Wages Payable: – Some companies pay their employees their wages in a week or 2 weeks. Because they have to pay this wages this year, so it will be the current liability of the company.

2. Interest payable: – Every company or person takes some loan from someone or the other for their needs and they have to be paid by the company this year. The interest paid by the company is the indirect expense of the company.

3. Commission payable: – The company often keeps paying commission to someone to get or take its project and this commission has to be done by the company in the current year itself.

Non current liability :– You must have come to know this by the name itself. Non current liability is such liability which is paid by the company over a period of more than one year. This liability is a large liability, which either the company cannot or does not want to pay in a short time. All the big companies take or issue this type of loan which has more time. Some examples of non current liability are shown below.

Example of non current liability in tally

1. Post-Employment Benefits: – These are the liabilities which are given by a company to its employee after his retirement. This is a non-current liability of a company which is given to the employee for a long time.

2. Bank Loan :- If the loan taken from any bank for more than one year comes under long term liability.

3. Home Loan:- A person takes this type of loan in his personal life, which he fulfills in a long time.

4. Warranty Liability: – Most of the companies give long term warranty on their product to their customers which means long term liability to the company. car, bike These are some examples of these.

What is the difference between a loan and a liability

Loan and liability cannot be said separately from each other. Because when a company or person takes a loan from someone, it has a liability to return that person’s loan. But if the company is giving loans or services to someone, then it is not a liability but an asset to the company. And at this place the loan and liability becomes opposite to each other. Because if the loan is being given by the company, then these are the assets of the company, while the liability company has that debt, then the company has to pay it in the coming time. When a loan is being given to someone by the company, then it is shown in the balance sheet of the company as loan and advance, but if the loan is taken then it is the loan and liability of the company.

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