Learn in the textbookThe Big Picture of Financial Statements
DefinitionLiabilities (負債) are things a company has an obligation to repay or pay in the future, such as loans and unpaid bills for purchases.
ExplanationLiabilities are recorded in the upper part of the credit (right) side of the balance sheet and, together with net assets, show the sources of funds. Because this money was raised from others such as banks and business partners, it is also called borrowed capital.
AnalogyIt is like money borrowed from a friend or a purchase you chose to pay for later: something that comes with a promise to pay eventually.
Memory hookThe character 債 in 負債 is the same one as in 債務 (debt), and it stands for a promise of payment owed to someone.