A present obligation of an entity towards others (creditors, investors, and other stakeholders), that arises from a past transaction/ event, the settlement of which is expected to cause an outflow of resources from the entity, reflecting the transfer of economic benefits to other parties. A liability is recognized in the statement of financial position when it is probable that an outflow of resources will result from the settlement of the obligation, and the amount at which the liability will be settled can be measured reliably.

Generally speaking, it is an mount payable in currency units (CUs) such as accounts payable or warranties payable (services to be provided in the future and constitute an obligation).

A liability may come in various forms including actual liability, estimated liability, and contingent liability.