FASB Concepts Statement No. 6 provides this definition of liabilities: “Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.” While this definition is somewhat less confusing than FASB Concepts Statement No. 6’s definition of assets, it still requires a good deal of explanation. Nonaccountants generally think of liabilities as simply “money that you owe.” While this is not too far off from a GAAP perspective, there are several ideas in Statement No. 6’s definition that will make the simple definition more accurate.

First, liabilities are measured at a point in time, which means, for financial statement purposes, as of the end of the government’s fiscal year. To be a present obligation means that the obligation has actually been incurred as of the year-end to be reported on the statement of net assets as a liability, meaning it is the result of past transactions or events. Second, the obligations are not simply those that must be satisfied by the payment of cash. Liabilities also consist of obligations of the organization to perform or transfer assets other than cash to the party to which the organization is obligated.

Some of the more common liabilities found recorded on the statement of net assets of governments are

• Accounts payable and accrued expenses
• Debt
• Deferred income

Taken From : Governmental Accounting Made Easy

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