Liabilities are claims against assets-that is, existing debts and obligations.
Businesses of all sizes usually borrow money and purchase merchandise on credit. Creditors may legally force the liquidation of a business that does not pay its debts. In that case, the law requires that creditor claims be paid before ownership claims. So, liabilities refer to the claims on total assets of a firm by its creditor/creditors.
Liabilities are IOUs or debts.
Liabilities means debts or creditors’ claims that a firm owes on the day the balance sheet is prepared.