Again current liabilities are a category on the balance sheet which most people would be familiar with. They are items which are owed by the business to third parties such as suppliers of HMRC and they consist of:
• Trade creditors or accounts payable (AP) are the invoices received from suppliers
• PAYE/NIC paid monthly to HMRC
• VAT paid quarterly to HMRC unless elected to pay monthly
• Net salaries where these have not been paid at the end of the month
• Corporation tax paid annually
• Accruals and deferred income both of which were discussed in the blogs on how to allocate and revenue and expenses to the profit and loss account
If the current liabilities on the balance sheet exceed the current assets management need to consider whether action needs to be taken such as obtaining further finance or extending credit terms with suppliers.