Liabilities & Capital

The 'official' definition of liabilities contained within the Framework is 'present obligations of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits'. Typical business liabilities are divided between current liabilities, which are expected to be paid within one year, and non-current liabilities, which are expected to be paid after more than one year.


Capital is also sometimes referred to as 'equity' or 'ownership interest', that is, the value which the owner or owners have invested in their business. The Framework defines Equity as 'the residual interest in the assets of the entity after deducting all its liabilities'.