Current vs non-current liabilities
Learn how current and non-current liabilities differ, how to classify them, and why the split matters.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Current vs non-current liabilities comes down to timing: current liabilities are due within 12 months or your operating cycle, and non-current ones later
- Both types sit on your balance sheet, and non-current liabilities are often called long-term liabilities
- A liability is non-current only if you can defer paying it for at least 12 months, so part of a long-term loan is usually current
- The split drives your working capital and current ratio, which lenders use to judge whether you can cover short-term debts
What’s the difference between current and non-current liabilities?
Current liabilities are debts you expect to pay within 12 months or within your normal operating cycle. Non-current liabilities are debts due after that, which is why they’re also called long-term liabilities.
Both appear on your balance sheet in two separate groups, which makes your financial statements easier to read. Think of it as the difference between this month’s supplier bill and the bank loan you’ll still be repaying in four years.
What are current liabilities?
Current liabilities are the amounts your business owes and expects to settle soon, usually within 12 months of the balance sheet date. Under Pernyataan Standar Akuntansi Keuangan (PSAK) 201, a liability is also current if you expect to settle it within your normal operating cycle.
Your operating cycle is the time between buying goods or services and collecting cash from customers. As the Ikatan Akuntan Indonesia (IAI) module on PSAK 201 explains, trade payables and accrued staff and operating costs count as current, even when some are due more than 12 months out.
Common current liabilities for an Indonesian small business include:
- money you owe suppliers, known as accounts payable or utang usaha
- wages and salaries you owe staff but haven’t paid yet
- Pajak Pertambahan Nilai (PPN), or value added tax, you’ve collected from customers and need to pay to the tax office
- Pajak Penghasilan (PPh) 21 income tax you’ve withheld from employee salaries
- Badan Penyelenggara Jaminan Sosial (BPJS) Ketenagakerjaan and BPJS Kesehatan contributions you owe for your employees
- short-term loans, overdrafts and the part of any long-term loan due within 12 months
- customer deposits and payments for goods or services you haven’t delivered yet, also called unearned revenue
What are non-current liabilities?
Non-current liabilities are debts you don’t have to settle within the next 12 months or your operating cycle. They usually fund bigger, longer-term investments, such as vans or premises.
Typical non-current liabilities include:
- bank loans repaid over several years, minus the portion due in the next 12 months
- leases on premises or vehicles that run for more than a year, minus the current portion
- deferred tax liabilities, meaning tax you’ll pay later because accounting and tax rules recognise some items at different times
- long-term employee benefit obligations, such as post-employment benefits
- bonds or shareholder loans with repayment dates beyond 12 months
A line of credit can sit in either group, depending on whether you must repay it within a year.
Current vs non-current liabilities: key differences
The main difference is timing, and timing shapes how you plan for each type. Here’s how they compare:
- Current liabilities are due within 12 months or your operating cycle, while non-current liabilities are due later
- Current liabilities are day-to-day items like supplier bills, wages, withheld tax and BPJS contributions, while non-current liabilities are mostly long-term loans and leases
- You usually pay current liabilities from cash on hand and customer payments, while you repay non-current liabilities in instalments over years
- Current liabilities feed short-term measures like the current ratio, while non-current liabilities feed measures of long-term financial health
How to classify a liability as current or non-current
Work through each liability at your reporting date, which is usually your financial year end. Under the PSAK 201 amendments that apply from 1 January 2024, a liability is non-current only if you have a right at the reporting date to defer paying it for at least 12 months.
The same amendments add disclosures for non-current loans with covenants you must meet within 12 months after the reporting date. Follow these steps for each item:
- Check the due date and mark anything payable within 12 months of the reporting date as current
- Mark supplier bills and other working capital items as current when they’re part of your normal operating cycle
- Treat the liability as non-current if, at the reporting date, you have a right to defer payment for at least 12 months
- Split long-term loans and leases, moving the instalments due in the next 12 months into current liabilities
- Review your loan covenants and note any you must meet within the next 12 months, so they’re disclosed
- Repeat the review at every reporting date, because non-current amounts move into current liabilities as due dates get closer
Many private businesses report under Standar Akuntansi Keuangan Entitas Privat (SAK EP), which replaced SAK ETAP from 1 January 2025. Your accountant can confirm which standard applies to you and how it treats your specific loans.
Example: splitting a bank loan on your balance sheet
Say your business takes out a Rp600,000,000 five-year bank loan to buy delivery vans, repaying Rp120,000,000 a year. Ignoring interest to keep it simple, the balance sheet you prepare straight after drawing the loan shows:
- Rp120,000,000 in current liabilities, for the repayment due within 12 months
- Rp480,000,000 in non-current liabilities, for the four years of repayments after that
A year later, after your first repayment, the next Rp120,000,000 moves into current liabilities and Rp360,000,000 stays non-current. At that reporting date, you also owe a supplier Rp25,000,000 for fuel and servicing, due in 30 days.
That supplier bill is current. Your current liabilities now total Rp145,000,000, and your non-current liabilities are Rp360,000,000.
Why the split matters for your business
Separating liabilities shows how much cash you need soon and how much you can repay over time. That’s the basis for working capital, which is your current assets minus your current liabilities.
In the example above, the Rp145,000,000 due within 12 months has to come from cash and other current assets, such as money customers owe you. Lenders check those figures to see whether you can meet short-term debts, and they look at non-current liabilities to judge your solvency.
Getting the split right also helps you with:
- spotting cash shortfalls before a big repayment falls due
- keeping an eye on loan covenants, such as a minimum current ratio your lender sets
- giving your accountant accurate figures for year-end reporting
- presenting clear numbers when you apply for finance
Keep track of your liabilities with Xero
Classifying liabilities correctly shows you what’s due soon and what you’ll repay over years. Xero’s balance sheet report groups your current and non-current liabilities, and automated bank feeds keep the figures up to date.
You can run financial reports whenever you need them and share them with your accountant. Try Xero today and get one month free.
FAQs on current vs non-current liabilities
Here are answers to common questions about classifying liabilities.
Can a long-term loan become a current liability?
Yes, each instalment moves into current liabilities once it’s due within 12 months. A covenant breach on or before the reporting date can also make the whole loan current if the lender can demand repayment.
What is a contingent liability?
A contingent liability is a possible debt that depends on a future event, such as the outcome of a customer’s legal claim against you. You usually disclose it in the notes to your accounts, then record it once payment is probable and you can estimate the amount.
How are liabilities different from expenses?
An expense is a cost you’ve used up in a period, shown on your profit and loss statement. A liability is money you still owe, so an unpaid electricity bill is both an expense and a current liability.
How do you classify a lease on the balance sheet?
When you record a lease on your balance sheet, split the lease liability the same way as a loan. Payments due within the next 12 months are current, and the rest is non-current.
Does every balance sheet split current and non-current liabilities?
Most do, but the IAS Plus summary of International Accounting Standard (IAS) 1 notes that a business can list items in order of liquidity when that’s more reliable and relevant. Banks often use this format, while most small businesses use the current and non-current split.
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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.