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Rita does chores for her neighbors and makes $45 each weekend. She owes her sister $80. Her liability is the amount that she owes to her sister which is $80.
What is liability?
Liability typically denotes being accountable for something, but it can also imply owing someone money or services.
Companies categorise their debts into two categories: short-term and long-term. While long-term liabilities are due over a longer period of time, current liabilities are due within a year. However, the short-term liabilities column of the balance sheet is where mortgage payments due this year are listed because they are regarded as the current portion of long-term debt.
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She owes her sister $80. That is her liability because she is liable to pay $80 to her sister.
What is Liability?
Liability can also include owing someone money or services, although it usually refers to being responsible for something.
Businesses divide their loans into two groups: short-term and long-term. While current liabilities must be paid within a year, long-term liabilities must be paid over a longer period of time. A corporation that secures a 15-year mortgage, as an example, assumes a long-term liability. However, because they are regarded as the current portion of long-term debt, the mortgage payments due this year are recorded in the balance sheet's short-term liabilities column.
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