In the process of learning to make a balance sheet, friends will all involve the subject of calculating total liabilities, and total liabilities will involve more calculations. Let's learn how this subject is calculated and what this value represents for the operation of the company.
Generally speaking, total liabilities refer to all debts that an enterprise undertakes and needs to repay. Liabilities can generally be divided into current liabilities and non-current liabilities according to the length of repayment period, so the total liabilities of enterprises include current liabilities, long-term liabilities and deferred taxes, which is the total liabilities of enterprise balance sheets.
Little friends may have questions. Sometimes, the total liabilities of an enterprise are greater than the total assets, or the total liabilities are less than the total assets. Is this an incorrect accounting or an abnormal phenomenon? If the total liabilities are greater than the total assets, according to the formula of assets = liabilities+owners' equity, it shows that the enterprise is insolvent and the liabilities are operating, which is a dangerous signal, if there is no problem in the accounts. If an enterprise's total liabilities are negative, it means that it may prepay or overpay. Prepaid or accounts payable represent the debit balance, which essentially belongs to the assets of the enterprise. Therefore, when the total liabilities of an enterprise are negative, we should carefully verify the account amount and then reclassify it as assets or creditor's rights.
In real life, many enterprises have been operating at a loss for many years. At the same time, we can't just define the absolute number of total liabilities of enterprises. We can comprehensively evaluate the operating conditions of enterprises by calculating more relevant ratios such as total asset-liability ratio, current ratio and quick ratio.