Liabilities are amounts or duties that a business owes to other parties and expects to discharge in the future. They may arise from borrowing, purchases made on credit, unpaid wages or taxes, and other binding commitments. Settlement can require the payment of cash, the transfer of assets, or the delivery of goods or services. Liabilities are reported separately from equity on the balance sheet. Equity represents the owners’ residual claim on the enterprise after its liabilities have been deducted from its assets.
Source: European Central Bank (ECB) (source). This glossary entry is an independently worded adaptation of the cited information.