Current vs non-current liabilities
Learn how current and non-current liabilities differ, where they sit on your balance sheet and why the split matters.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Current and non-current liabilities are the two ways your business groups what it owes, based on when each debt falls due.
- Current liabilities are due within 12 months, while non-current liabilities are due further out and are often called long-term liabilities.
- Both sit in the liabilities section of your balance sheet, and together they make up your total liabilities.
- Sorting debts this way helps you, your lenders and your accountant judge your short-term cash position and long-term financial health.
What are current liabilities?
Current liabilities are debts your business expects to settle within 12 months, or within its normal operating cycle if that is longer. They cover the short-term amounts you owe to suppliers, staff, lenders and tax authorities.
These are the obligations that shape your day-to-day cash flow, so keeping track of them helps you plan payments and avoid surprises. They are one part of your total liabilities.
Common current liabilities include:
- accounts payable owed to suppliers
- short-term debt and loans
- wages and payroll owing
- GST/HST and income taxes owing
- accrued expenses you have incurred but not yet paid
- unearned or deferred revenue for goods and services not yet delivered
- the current portion of long-term debt due within the next 12 months
What are non-current liabilities?
Non-current liabilities are debts that fall due beyond 12 months. They are also called long-term liabilities, and they usually fund larger purchases or longer-term growth.
Because these obligations are repaid over several years, they tend to carry interest and formal repayment schedules. They tell you how much your business is committed to paying over the long term.
Common non-current liabilities include:
- long-term loans repaid over several years
- bonds or debentures payable
- lines of credit not due within 12 months
- deferred tax liabilities
- long-term lease obligations
- mortgages payable on property
Current vs non-current liabilities: the main differences
The difference between current and non-current liabilities comes down to timing: when the debt is due and how it is used. Current liabilities are short-term and keep the business running, while non-current liabilities are long-term and often fund bigger investments.
That timing also drives where each debt appears on your reports and what it signals about your finances. Here is how the two compare:
- Timing: current liabilities are due within 12 months, while non-current liabilities are due after that
- Balance sheet placement: current liabilities are listed first, with non-current liabilities shown below them
- Purpose: current liabilities cover everyday operating costs, while non-current liabilities fund long-term assets and growth
- Examples: accounts payable and payroll owing are current, while mortgages and long-term loans are non-current
How current and non-current liabilities appear on the balance sheet
On your balance sheet, liabilities are grouped by due date so readers can see short-term and long-term obligations at a glance. Current liabilities appear first, followed by non-current liabilities.
Your total liabilities are simply the two added together: total liabilities equal current liabilities plus non-current liabilities. This total sits opposite your assets and equity, which keeps the balance sheet in balance.
One item moves between the two groups over time. As a long-term loan gets closer to its due date, the amount payable within the next 12 months shifts up into current liabilities. This is known as the current portion of long-term debt.
Why the difference matters
Splitting your debts this way shows two different things: liquidity, or your ability to cover short-term bills, and solvency, or your ability to meet long-term obligations. Lenders, investors and your accountant read both before making decisions.
The split feeds a few plain measures of financial health. Working capital is your current assets minus your current liabilities, and it shows the cash cushion you have for day-to-day costs.
Two ratios build on the same idea. The current ratio divides current assets by current liabilities to gauge short-term strength. The quick ratio does the same but leaves out inventory for a stricter view. Watching these helps you spot pressure early and manage debt before it becomes a problem.
How liabilities are classified in Canada
In Canada, how you classify liabilities depends on which accounting standards your business follows. The rules set out when a debt counts as current or non-current, based on your right to defer settlement.
Publicly accountable enterprises report under International Financial Reporting Standards (IFRS). Under International Accounting Standard 1 (IAS 1), a liability is non-current only when you have the right to defer settlement. That right must extend for at least 12 months after the reporting date. IFRS 18 replaces IAS 1 for annual reporting periods beginning on or after 1 January 2027.
Most private companies instead use Accounting Standards for Private Enterprises (ASPE), which follow the same 12-month principle in a form suited to smaller businesses. Whichever standard applies, keeping clear records also supports the reporting you file to meet Canada Revenue Agency (CRA) requirements. For a fuller picture, it helps to understand how these classifications flow through your financial statements.
Track your liabilities and balance sheet with Xero
Xero brings your invoices, bills and bank transactions together, so your balance sheet stays current and your liabilities are easy to follow. You can see what you owe and when it is due, then plan payments with confidence.
Start sorting your short-term and long-term debts today and get one month free.
FAQs on current and non-current liabilities
Here are answers to frequently asked questions about current and non-current liabilities.
What is the difference between current and non-current liabilities?
Current liabilities are due within 12 months, while non-current liabilities are due after that. The split shows how much your business must pay soon versus over the longer term.
Is a bank loan a current or non-current liability?
It can be both: the portion due within 12 months is a current liability, and the rest is non-current. A short-term working-capital loan or overdraft is usually treated as fully current.
Are non-current liabilities the same as long-term debt?
Long-term debt is one type of non-current liability, but the category is wider. It also covers items like deferred tax liabilities and long-term lease obligations.
Where do current and non-current liabilities go on the balance sheet?
Both sit in the liabilities section, with current liabilities listed first and non-current liabilities below. Your total liabilities are the two added together.
Related Terms
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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.