a) Short term liability/ current liability:

– When the bills and loans are to be paid within 1 month then is short term liabilities.

– For ex: payments for labour, fertilizers, electricity, water etc.

– Accumulated bills to be paid within one month also fall under short term liabilities or current liabilities.

b) Medium-term liabilities:

– It is to be paid between 1 month to 1 year.

– Medium term loan and part of long term loan is an example of medium term liabilities. – Medium term payment is an example of medium term liabilities.

c) Long term liabilities:

– All the forms of long type of loan fall under long term liabilities. For ex: mortgage on land.

Note:

I) When the net worth is positive or greater than zero, then the firm is solvent.

ii) Similarly when the net worth is less than zero then the firm is bankrupt or insolvent.

Iii) When the net worth is zero then the firm is just solvent.