Current liabilities
Learn what current liabilities are, see common examples, and how to calculate them.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Current liabilities are the debts your business owes and must pay within 12 months, which is why they're also called short-term liabilities.
- Common examples include accounts payable, accrued expenses, GST/HST and income tax payable, and wages owed to staff.
- You can total your current liabilities from your balance sheet and use them to work out your working capital, current ratio, and quick ratio.
- Lenders and investors look at these figures to gauge whether your business can cover its short-term obligations.
What are current liabilities?
Current liabilities are the debts your business owes and must pay within 12 months. They're also called short-term liabilities.
These are the near-term bills and obligations that keep your day-to-day operations running, from supplier invoices to taxes and wages. Accounts payable, the money you owe suppliers for goods and services bought on credit, is usually the largest current liability for a small business.
You'll find current liabilities grouped together on your balance sheet, separate from longer-term debts. Tracking them helps you see what's due soon and plan your cash flow around it. For a wider view of how debts and what you own fit together, see the guide to assets and liabilities for small business.
Current liabilities vs non-current liabilities
The difference comes down to timing. Current liabilities are due within 12 months, while non-current liabilities are longer-term debts you'll repay over more than a year.
A supplier invoice due next month is a current liability. A business loan you'll pay off over 5 years is a non-current liability, though the portion due in the next 12 months counts as current. For a closer look at how the two compare, read about current vs non-current liabilities.
Examples of current liabilities
Current liabilities cover a range of short-term debts and obligations. Here are the ones you're most likely to see on a Canadian small business balance sheet:
- Accounts payable: money owed to suppliers for goods and services bought on credit
- Accrued expenses: costs you've incurred but not yet paid, such as utilities or interest
- GST/HST and income tax payable: GST/HST you've collected and income tax owed to the CRA
- Wages and payroll owed: staff pay you owe, including CPP and EI source deductions
- Short-term loans and credit card debt: borrowing due within 12 months
- Current portion of long-term debt: the part of a longer loan due in the next year
- Unearned revenue: payments received for goods and services you haven't delivered yet
- Dividends or interest payable: amounts declared or accrued but not yet paid out
How to calculate current liabilities
To calculate your current liabilities, add up every short-term debt your business owes. You can pull these figures straight from the current liabilities section of your balance sheet.
Current liabilities = accounts payable + accrued expenses + wages payable + taxes payable + short-term debt + current portion of long-term debt
Say a Canadian small business has these amounts owing at the end of the month:
- Accounts payable: $12,000
- Accrued expenses: $3,000
- Wages payable: $5,000
- GST/HST payable: $2,000
- Short-term loan: $8,000
- Current portion of long-term debt: $4,000
Add these together and the total current liabilities come to $34,000. That's the amount the business needs to be ready to pay within the next 12 months.
Current liabilities in accounting
In accounting, current liabilities sit on your balance sheet, listed separately from non-current liabilities and above your equity. They pair with your current assets to show how well you can cover short-term obligations.
A few key measures use current liabilities to gauge your financial health:
- Working capital: current assets minus current liabilities, showing the funds available for day-to-day running
- Current ratio: current assets divided by current liabilities, where a result higher than 1 is generally preferred
- Quick ratio: your most liquid assets divided by current liabilities, a stricter test that leaves out inventory
Lenders and investors look at these figures to judge whether your business can pay what it owes. Keeping your current assets and liabilities up to date makes these numbers easy to check.
Track your current liabilities with Xero
Keeping on top of what you owe is easier when your finances sit in one place. Xero updates your balance sheet as you record bills, run payroll, and file your GST/HST returns. That means you can see your current liabilities in real time and plan your cash flow with confidence. Sign up for Xero and get one month free.
FAQs on current liabilities
Here are answers to some frequently asked questions about current liabilities.
What is a good current ratio?
A current ratio higher than 1 is generally seen as healthy, since it shows you have more current assets than current liabilities. Many lenders like to see a ratio between 1.5 and 2.
What is the difference between the current ratio and the quick ratio?
The current ratio counts all your current assets, while the quick ratio leaves out inventory and other assets that are harder to turn into cash. The quick ratio is a stricter test of whether you can meet short-term debts.
Are accounts payable a current liability?
Yes. Accounts payable is money you owe suppliers for goods and services bought on credit, and it's usually due within 12 months, so it's a current liability.
What is the difference between current and non-current liabilities?
Current liabilities are due within 12 months, while non-current liabilities are longer-term debts repaid over more than a year. A supplier bill is current, whereas a multi-year loan is non-current.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.