Current Liabilities

On doing business, there are some amounts which always remain to be given to the person who supplies us the raw-materials we call them Trade Creditors.  The concept is when we purchase raw-material from suppliers, we don’t make immediate payment instead we demand few days of credit from them, say, 1 month; now the good point is after 1 month we clear their payment but purchase another lot of raw-materials; in this way some amount is always due to be paid to creditors at any point of time in a year. It’s like interest free loan taken from suppliers so it’s indirect gain for us.

Similarly, there are some other short term obligations which we have to pay after the end of an accounting year we call it as ‘short term provisions’ it include proposed dividend, current tax, employee benefits etc.

Apart from that, there are some long term loans which are maturing within 12 months of preparation of Balance Sheet of the current year, we put it in head as ‘Other Current Liabilities’.  

Sometimes, we take Short term Loans to finance our current assets. We call it as ‘short Term Borrowings’.

Here one thing should be noted that it’s not necessary to have all the items in current liabilities there can have only one item or two or all.

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