Textbook Problem

Define liabilities. Explain the meaning of obligations in the context of a liability.

To determine

Explain the term liability and also explain the concept obligation in context of liability.

Explanation of Solution

Liabilities:

The claims creditors have over assets or resources of a company are referred to as liabilities. These are the debt obligations owed by company to creditors. Liabilities are classified on the balance sheet as current liabilities and long-term liabilities.

Obligations:

Obligation refers to the duties imposed on the company legally or socially, which are bound to do by the contract, promise or moral responsibility