What is Current Liabilities?
Current Liabilities are liabilities the company owes that require the usage of cash within one year. Because these obligations require near-term cash payments, they’re also known as Short-Term Liabilities. This is usually the standard definition for Current Liabilities because most companies have an operating cycle shorter than a year.
An operating cycle is the average period of time between producing the goods and receiving cash from customers. For companies whose operating cycle is longer than one year, any Liability expected to be settled with cash payments within the operating cycle can classified as a Current Liability.
In most instances, companies have operating cycles shorter than one year. Therefore, most companies’ Current Liabilities are obligations that require cash settlement within one year.
Companies disclose the Current Liabilities they owe and their values on the Balance Sheet. The one year period criteria is measured as 12 months from the date of the Balance Sheet