What is defined as an amount owed by a business?

A liability is defined as an amount owed by a business to outside parties. This can include debts such as loans, accounts payable, and any other obligations that the business is required to settle in the future. Liabilities represent a claim against the company’s assets; in other words, they reflect what the business owes rather than what it owns.

In accounting, liabilities are recorded on the balance sheet and are generally categorized into current and long-term liabilities. Current liabilities are due within one year, while long-term liabilities are due beyond one year. This distinction is critical for understanding a company’s financial health and liquidity.

While assets represent resources owned by a business, equities refer to the owner's claim on those resources after liabilities have been settled. An "account" is a financial record for assets, liabilities, or equity, rather than a specific amount owed. Each of these terms plays a distinct role in accounting, but in this context, liability is the term that directly answers the question about what is owed by a business.