The current liabilities of a company consist of debt obligations that are due within one year and they play an important role in determining certain accounting and liquidity ratios of a business. In order to meet ever-pressing corporate governance standards, it is necessary for a company to calculate current liabilities accurately so that the financial stability of a business can be regularly determined (or estimated) by current or prospective shareholders. Analysts and creditors often use the current ratio or the quick ratio to determine whether a company is able to pay off its current liabilities.
While the following examples do not constitute a full list of debt obligations, they represent some of the most common current liabilities a company may be responsible for within the course of a year.
Some of the most common current liabilities of a company fall under the purview of accrued expenses. These debt obligations can include accrued salaries or wages due to employees, real estate or property taxes accrued, or interest accrued on loans or other financing each payable within the year. Accrued federal, state and local taxes are also included in current liabilities.
Companies may be responsible for payroll liabilities that are due within the year. These current liabilities can include employee federal, state or local income tax withheld, as well as FICA and Medicare payments withheld for staff.
Employer benefits such as retirement plan contributions or health insurance premiums may also constitute current liabilities.
Some current liabilities stem from business financing activities. These can include dividends payable, which are the dividends declared by a company's board of directors that have yet to be paid out to shareholders, bank account overdrafts and other short-term advances from a financial institution.
Unearned revenue is also considered a current liability; these payments have been advanced to the company, but the work still needs to be completed.