What are long-term liabilities?
August 20, 2012
What are operational obligations? What are financing obligations? How is a bond different from a note payable? How to define long-term liabilities? Find answers in this accounting article.
Long-term liabilities are obligations due in a period exceeding one year or operating cycle, whichever is longer.
Long-term liabilities can be classified as follows:
- Operational obligations
- Financing obligations
In this article we will review operational and financing obligations.
Operational obligations are liabilities that arise from business operations.
Financing obligations are liabilities that arise from financing agreements (i.e., from borrowing money). Such obligations usually require payments of interest and principal.