Current liabilities
Learn what current liabilities are, see common examples and find out how to calculate them for your business.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Current liabilities are debts your business must pay within 12 months, such as supplier bills, wages, taxes and short-term loans
- Irish company balance sheets show them under “Creditors: amounts falling due within one year”
- To calculate them, add up every amount due in the next 12 months, including loan repayments due in that period
- The current ratio and working capital compare current liabilities with current assets to show whether you can cover short-term debts
What are current liabilities?
Current liabilities are the debts and obligations your business must settle within 12 months, or within its normal operating cycle. They’re also called short-term liabilities.
Picture a café owner in Galway. She buys coffee beans on 30-day terms, owes staff for the last week of the month and has a value-added tax (VAT) return coming up. Each of those amounts is a current liability until she pays it.
The same applies to any purchase on credit, unpaid expense, short-term loan or customer prepayment. It stays a current liability until you settle it.
Examples of current liabilities
Most small businesses carry a mix of short-term debts. These are the current liabilities you’re most likely to see on your books.
- Accounts payable, also called trade creditors, for goods and services you’ve bought on credit
- Short-term borrowing, such as bank overdrafts, short-term loans and credit card balances
- Accrued expenses, such as wages, rent or utilities you’ve incurred but not yet paid
- Pay As You Earn (PAYE), Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) deducted from wages and owed to Revenue
- VAT and corporation tax due to Revenue
- Unearned revenue, meaning customer prepayments for goods or services you’ve yet to deliver
- The current portion of long-term debt, meaning loan repayments due in the next 12 months
Accounts payable is often one of the largest current liabilities for small businesses. Supplier credit is widespread in Ireland: the Atradius Payment Practices Barometer Ireland 2026 found that 44% of business-to-business sales are made on credit, with most suppliers giving 30 days to pay.
Current vs non-current liabilities
The difference comes down to timing. Current liabilities fall due within 12 months, while non-current liabilities fall due after that.
Non-current liabilities include long-term bank loans and long-term leases. They show what your business owes over the longer term, beyond the coming year.
Some debts sit in both groups. Say you take out a five-year bank loan and repay €12,000 a year: the €12,000 due in the next 12 months is a current liability, and the rest is non-current.
Each year, the next 12 months of repayments moves into current liabilities. The non-current balance shrinks as the loan runs down.
Current liabilities on the balance sheet
Irish company accounts follow the statutory formats in the Companies Act 2014. These formats show current liabilities under the heading “Creditors: amounts falling due within one year”.
Items listed under this heading include:
- bank loans and overdrafts
- payments received on account
- trade creditors
- other creditors, including tax and social insurance
Liabilities carry a credit balance in your accounts. A credit entry increases a liability and a debit entry reduces it, so paying a supplier bill is a debit to accounts payable.
How to calculate current liabilities
You can total your current liabilities in four steps. Work from your balance sheet or your list of unpaid bills and debts.
- List every amount your business owes, including supplier bills, taxes, wages and loans
- Keep only the amounts due within the next 12 months
- For long-term loans, include just the repayments due in that 12-month window
- Add the amounts together to get your total current liabilities
Here’s how that looks for a small retailer. It owes €18,000 to suppliers, €4,500 in accrued wages, €3,200 in VAT, €2,300 on its overdraft and €6,000 in loan repayments due within 12 months.
Adding these gives €18,000 + €4,500 + €3,200 + €2,300 + €6,000 = €34,000 in current liabilities.
Why current liabilities matter
Current liabilities show how much cash your business needs over the next year. Comparing them with current assets tells you whether you can cover those bills.
The current ratio is current assets ÷ current liabilities. A result above 1 means your current assets cover your short-term debts.
Say the retailer above has €51,000 in current assets. €51,000 ÷ €34,000 gives a current ratio of 1.5, so it has €1.50 in current assets for every €1 it owes in the short term.
Working capital is current assets − current liabilities. For the retailer, that’s €51,000 − €34,000 = €17,000 to fund day-to-day running costs.
Lenders also review your current liabilities before approving a loan. They use them to judge whether you can take on and repay more debt.
Keep track of current liabilities with Xero
Knowing your current liabilities helps you plan cash flow and talk to your bank with confidence. It also helps you pay suppliers and Revenue on time.
With bank feeds keeping your books current, the Xero balance sheet report shows what you owe whenever you need it. You can also track supplier bills in Xero and see exactly what’s due and when.
Try Xero today and get one month free to see where your business stands.
FAQs on current liabilities
Here are quick answers to other common questions about current liabilities.
Is unearned revenue a current liability?
Yes, if you expect to deliver the goods or services within 12 months. It moves from liabilities to revenue once you’ve delivered what the customer paid for.
Is a bank overdraft a current liability?
Yes. Overdrafts are usually repayable on demand, so they count as current even if you use the facility year after year.
Can a business have negative working capital?
Yes, when current liabilities are higher than current assets. It can signal cash pressure, although businesses that collect cash upfront and pay suppliers later sometimes run this way on purpose.
Are current liabilities the same as accounts payable?
No. Accounts payable covers supplier bills only, while current liabilities also include taxes, wages, loans and customer prepayments.
Does next month’s rent count as a current liability?
Only once you owe it. Rent becomes a current liability once the rental period has passed or the invoice falls due.
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.