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Liability type

Scenarios to use liability accounts

Loan balances

You can use liability accounts to keep track of the money you've borrowed, such as car loans, home equity loans, and mortgages. When you make a loan payment, transfer the principal amount from the account you paid to the loan liability account. This will keep the liability account updated and will always show the amount you owe on the loan.

Accrued liabilities

Keep track of accrued liabilities, such as payroll taxes and payable income taxes. When you do the payroll for your small business, transfer the payroll taxes portion of each check to a payroll liability account as part of the split transaction. This technique makes it easy for you to keep track of the amount that's due for payroll taxes.

Accounts payable

Keep up-to-date accounts payable records for your small business.