Current liabilities

Learn what current liabilities are, see Malaysian examples and work out what your business owes in the next 12 months.

Published Wednesday 30 September 2026

Table of contents

Key takeaways

  • Current liabilities are debts your business expects to settle within 12 months or within its normal operating cycle
  • Supplier bills, unpaid wages, short-term loans and taxes owed are all common examples
  • Malaysian employers also owe statutory contributions and tax instalments that count as current liabilities until paid
  • Comparing current liabilities with current assets shows whether you can cover the bills coming up soon

What are current liabilities?

Current liabilities are debts your business must settle soon, usually within 12 months or within your normal operating cycle. They’re also called short-term liabilities.

Malaysian Financial Reporting Standard (MFRS) 101 sets a wider test than the 12-month rule alone. Based on the Malaysian Accounting Standards Board (MASB) criteria, a liability is current if:

  • you expect to settle it within your normal operating cycle
  • you hold it mainly for trading
  • it’s due for settlement within 12 months after the reporting period
  • you have no unconditional right to delay settlement for at least 12 months after the reporting period

Picture a café that buys coffee beans from a supplier on 30-day credit. Until the café pays that bill, the amount sits on its balance sheet as a current liability.

Your company type decides which rulebook applies. An IFRS Foundation note on Malaysian standards confirms that private entities can choose MFRS or the Malaysian Private Entities Reporting Standard (MPERS). MPERS closely matches the international standard for smaller businesses.

Examples of current liabilities

Most current liabilities come from everyday trading. Based on this current liability overview from AccountingTools, common examples include:

  • accounts payable, which is money you owe suppliers for purchases made on credit
  • accrued expenses, such as wages your staff have earned but you haven’t paid yet
  • bank overdrafts and short-term loans
  • the current portion of a long-term loan, meaning repayments due in the next 12 months
  • taxes you owe but haven’t paid
  • customer deposits and other unearned revenue, where customers pay before you deliver
  • dividends that have been declared but not yet paid

Accrued expenses are easy to miss because no invoice arrives. The Corporate Finance Institute (CFI) comparison describes them as costs, like payroll or utilities, that you’ve incurred before being billed. Accounts payable are amounts a supplier has already invoiced.

You record accruals under accrual accounting, which matches each cost to the period it relates to. For invoiced amounts, online bill payment gives you a clear view of what’s due and when.

Current liabilities for Malaysian businesses

If you employ staff or are registered for tax, you’ll also owe statutory amounts. Each is a current liability until you pay it, and common ones include:

You file an SST return every period, even when you owe no tax. Recording contributions each pay run keeps them visible, and payroll software can handle the calculations for you.

How to calculate current liabilities

Total current liabilities is the sum of every short-term obligation you owe at a set date. It appears on your balance sheet, one of the core financial statements, and these steps get you there:

  1. Choose the balance sheet date you’re reporting on, such as your financial year-end
  2. List every short-term amount owed at that date, including bills, accruals, contributions and taxes
  3. Add the part of any long-term loan that’s due within the next 12 months
  4. Add up all the amounts to get your total current liabilities

Say your trading business owes these amounts at 31 December:

  • RM18,000 in trade payables
  • RM6,500 in accrued wages
  • RM2,100 in EPF, SOCSO and EIS payable
  • RM1,500 for this month’s CP204 instalment
  • RM3,200 in SST payable
  • RM12,000 for the current portion of a bank loan

Adding these together gives total current liabilities of RM43,300.

Current vs non-current liabilities

The dividing line is timing. Under the MFRS 101 tests above, current liabilities typically include:

  • amounts due within 12 months or within your operating cycle
  • supplier bills, accruals and statutory contributions
  • the next 12 months of repayments on a term loan
  • bank overdrafts

Non-current liabilities are longer-term obligations you can defer beyond 12 months. They typically include:

  • loan and hire purchase instalments due more than 12 months after the reporting date
  • borrowings you have an unconditional right to defer for at least 12 months

One loan can sit in both groups. Next year’s repayments are current, and the remaining balance is non-current.

Why current liabilities matter

Your current liabilities show how much cash you’ll need soon. Comparing them with current assets tells you, and your lenders, whether you can cover it.

Working capital is current assets minus current liabilities, so a positive figure means your short-term assets cover your short-term debts. The current ratio divides current assets by current liabilities. A result of 1.0 or higher is generally acceptable, but the ideal varies by industry.

The quick ratio is stricter. It compares only cash, marketable securities and receivables with current liabilities, leaving out inventory because it can be hard to sell fast.

Using the example above, RM65,000 of current assets against RM43,300 of current liabilities gives working capital of RM21,700 and a current ratio of about 1.5. Watching these numbers alongside your cash flow helps you plan for busy payment dates like day 15 of each month.

Some possible obligations, such as a pending legal claim, aren’t liabilities yet. Under International Accounting Standard (IAS) 37, which MFRS 137 mirrors, you disclose these contingent liabilities in your notes unless payment is a remote possibility.

Keep track of what you owe with Xero

Knowing your current liabilities at a glance helps you pay on time and plan with confidence. With Xero, you can manage bills, track payroll liabilities and see an up-to-date balance sheet in one place. Try Xero today and get one month free.

FAQs on current liabilities

These quick answers cover a few more questions about current liabilities.

Are current liabilities a debit or credit balance?

Current liabilities normally carry a credit balance. When you pay one off, you record a debit, which reduces the balance.

Is a bank overdraft a current liability?

Yes. Banks can usually demand repayment of an overdraft at any time, so it stays current even if you use it for months.

Can a long-term loan become a current liability?

Yes. Repayments move to current liabilities once they fall due within 12 months. Breaching a loan condition can make the whole balance current if the lender can then demand repayment.

Is unearned revenue a liability?

Yes. When a customer pays upfront, you owe them the goods or service. You record a liability, then move it to revenue once you deliver.

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.