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LIABILITY

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amount payable in dollars (e.g., accounts payable) or future services to be rendered (e.g., warranties payable). The party having the liability is referred to as the debtor. There are various types of liabilities. An actual liability actually exists and has a stated amount (e.g., bonds payable). An ESTIMATED LIABILITY also actually exists, but the amount has to be predicted (e.g., estimated tax liability). These liabilities are booked and are shown in the balance sheet as credit balances under current or noncurrent liabilities, depending upon whether they will be paid in a period of more or less than one year. A CONTINGENT LIABILITY is one that may or may not become due (e.g., notes receivable discounted; a pending lawsuit). A contingent liability is usually footnoted in the financial statement.