The Right-Hand Side
The firm's liabilities are the first thing listed on the right-hand side of the balance sheet. These are classified as either current or long-term. Current liabilities, like current assets, have a life of less than one year (meaning they must be paid within the year) and are listed before long-term liabilities. Accounts payable (money the firm owes to its suppliers) is one example of a current liability.
A debt that is not due in the coming year is classified as a long-term liability. A loan that the firm will pay off in five years is one such long-term debt.
Finally, by definition, the difference between the total value of the assets (current and fixed) and the total value of the liabilities (current and long-term) is the shareholders' equity, also called common equity or owners' equity.
The value of the firm's assets is equal to the sum of its liabilities ahd shareholders' equity:
Assets = Liabilities + Shareholders' equity [2.1]
