WHAT IS A FIXED LIABILITY? (ECONOMY) - CULTURE VOCABULARY - 2025

The fixed liability in economics is one of the concepts that is applied to qualify the different expenses that any company incurs in the development of its activity.

In this way, its use is essential to be able to calculate the accounting. This way you can control whether the company is making profits or losses.

There are other concepts related to this that should not be confused, such as current or deferred liabilities, both within the expenses section.

In income we find some such as current assets, deferred or functional. Taking into account all these, the company will know if its economic operation is adequate or if it must make any changes.

Definition of fixed liability in economics

What are liabilities?

To understand what fixed liabilities are, you must first have some notion of the general concept of liabilities.

The liability is what a company owes. These debts can be due to various circumstances and be of different types.

They can be fixed, variable, deferred and others. In general, according to International Accounting Standards, they are all those that are subject to a contractual obligation and that can be paid with the capital of the company.

They can be due to loans that are needed, to the expenses of purchase of material or other reasons

Fixed liabilities

Within the liabilities, the company must separate those that are fixed or those that are of other types. When making a balance sheet they are usually placed on the right side of the accounting document.

Fixed liabilities are all debts that the company acquires that do not have to be paid until at least one year later. These types of debts are supposed to be used for long-term investments.

They can also be used to finance some current expenses. For example, it is usual that with the money from a long-term loan you can pay some payroll or the expenses that the daily operation of the company entails.

Examples of fixed liabilities

As already explained, fixed liabilities are those maturing in more than one year. That is why they usually correspond to quite large expenses and that must be covered with the profits that are generated.

These expenses include, for example, mortgages to purchase homes or premises. These are usually paid in the long term and, whether for the family or business economy, it is a very important investment, so it is difficult to pay in full in cash.

Likewise, other loans that are requested from banks are included within this concept. Any large amount usually goes on credit, so the terms to pay it is several years.

References

1. Economy 48. Fixed Liabilities. Retrieved from economia48.com
2. Expansion. Passive. Retrieved from expansion.com
3. Investopedia. Noncurrent Liabilities. Retrieved from investopedia.com

4. Gordon Shillinglaw, Moses L. Pava. Accounting. Retrieved from britannica.com
5. Brown, Gareth. Difference between long term debt and non-current liabilities. Retrieved from intelligentinvestor.com.au