Liabilities & Loans Glossary
Plain-English definitions for the key terms you'll encounter when working with business liabilities and loans.
Accounts Payable (AP)
Money owed to suppliers for goods or services received but not yet paid for. A current liability — expected to be settled within 30–60 days in most cases.
Amortization Schedule
A table showing the breakdown of each loan payment into principal and interest over the life of the loan. Provided by the lender. Essential for recording loan payments correctly in QBO — each payment needs to be split between the two.
Current Liability
A financial obligation due within the next 12 months. Examples: accounts payable, GST/HST payable, payroll liabilities, the current portion of a long-term loan. Tracked closely for cash flow management.
Current Portion of Long-Term Debt
The amount of a long-term loan's principal that must be repaid within the next 12 months. Reclassified from long-term to current each year so the Balance Sheet accurately reflects near-term obligations.
Deferred Revenue
Payment received from a customer for work not yet delivered. Recorded as a liability because you owe the customer a service or product. Moves to revenue when the work is completed.
Interest Expense
The cost of borrowing — the portion of loan and credit payments that goes to the lender as compensation for the use of their money. A deductible business expense. The principal portion of a payment is not an expense.
Leverage
Using borrowed money to finance business operations or investments. High leverage means a significant portion of assets are financed by debt. Not inherently bad — but it increases financial risk and requires consistent cash flow to service.
Line of Credit (LOC)
A flexible revolving credit facility. You draw funds as needed up to a pre-approved limit and repay as cash allows. Interest is charged only on the amount drawn. Recorded as a liability — the outstanding balance appears on the Balance Sheet.
Long-Term Liability
A financial obligation due more than 12 months from the balance sheet date. Examples: the non-current portion of a bank loan, long-term equipment financing, a mortgage.
Personal Guarantee
A commitment by an individual (typically the business owner) to repay a business loan personally if the business cannot. Common requirement for small business lending. Doesn't change the corporate accounting, but significantly affects the owner's personal financial risk.
Principal
The original amount borrowed, or the remaining balance of the loan not yet repaid. Principal repayments reduce the loan balance on the Balance Sheet but are not a tax-deductible expense.
Revolving Credit
A credit facility where the borrowing limit resets as repayments are made — like a credit card or line of credit. Contrast with a term loan, where the credit is advanced once and repaid on a fixed schedule.
Term Loan
A loan advanced in a lump sum and repaid over a fixed period with regular principal and interest payments. Each payment reduces the outstanding balance until it reaches zero.