Non-Current Liabilities on a Balance Sheet: Definition & Examples

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  • 0:01 What Are Non-Current…
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Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Non-current liabilities are an important component of the financial health of a company. In this lesson, you'll learn about non-current liabilities and where they fit into a balance sheet. A short quiz follows the lesson.

What Are Non-Current Liabilities?

In order to assess the financial health of a company we need to look at its component parts. These parts include a company's liabilities. Liabilities are simply something of value a business owes to another person or organization. In this lesson, we'll be looking specifically at non-current liabilities, which are the long-term financial obligations of a business that do not come due for payment for a year or more. A financial obligation can be a payment of money, goods or services. If the money owed is for repayment of a loan, such as a mortgage or an equipment lease, then the liability is a debt. Liabilities are reported on a company's balance sheet.

An Overview of the Balance Sheet

A balance sheet is a financial statement that provides a snapshot of the overall picture of the company's finances for a specific point in time. It lists the company's assets, which are everything that the business owns, and its liabilities, which are all of the business' financial obligations. Finally, it determines owner's equity, the value left for the owners, and it does this by subtracting the value of the liabilities of the company from the value of its assets (Assets - Liabilities = Equity).

Non-Current Liabilities Reported on a Balance Sheet

Let's look at some common types of non-current liabilities that are reported on balance sheets.

Credit lines. A credit line is a credit arrangement where a lender, such as a bank, makes a specific amount of funds available for the business to draw upon when needed. Instead of receiving a lump sum loan, the business will draw from the line the specific amount of money as needed during the time period the credit line is effective and up to the credit limit permitted by the lender. Credit lines work a lot like credit cards, with a time limit. If the company draws upon the line to purchase a capital good that will take a year or more to pay off, it will be a non-current liability.

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