How Do You Use Liability Analysis In Accounting?
Your business may be raking in cash on a steady basis, but if accounting shows your liabilities–debts, taxes due, accounts payable, mortgages–are more than you can pay off, the picture isn’t as rosy as you think. Analyzing your financial liabilities is essential if you want to know how well you’re really doing. Learn what liability means. Know the difference between short and long term liability and the different kinds of liability, such as taxes or bills due to your suppliers and subcontractors. Keep detailed accounting records of your liabilities. To make a successful analysis you need to have all the facts about what you owe, to whom and whether your debts are short-term–due in less than a year–or long-term. Use accounting software that provides adequate liability analysis for your kind of business. Choose software you can understand and use easily, and buy from a company that provides support and training. Divide your business’s current assets by your short-term liabilities to
