liability

A liability is anything you owe. All your debts and obligations are liabilities. This includes the balance on your credit cards, the amount you owe on a car or student loans, a mortgage, even an IOU for the $10 you borrowed from a friend. Some liabilities are short term that you pay off within a few months, like a $100 credit card balance.  Others may be long term and paid off over years and years, like a mortgage.  When you defer paying for something until later, you have a liability to represent the future payments you’ll need to make. As you pay it off, the liability will shrink down to where you don’t owe anything anymore and the liability is equal to zero.