Set up liabilities in the chart of accounts by giving it its proper name such as accounts payable, loans payable, wages payable, payroll taxes, etc. Liability accounts are separated into current (short-term) liabilities that need to be repaid within 12 months, and long-term liabilities that usually are repaid more than a year from the date acquired.

Liabilities: The COA liability category involves long-term and short-term borrowings, trade payable, interest payable, and other current liabilities. All the liability accounts contain the account number starting with 2.

A typical chart of accounts has five primary types of accounts: Assets. Liabilities. Equity. Revenue. Expenses. An expense account balance, for example, shows how much money has been spent to operate your business, whereas a liabilities account balance shows how much money your business still owes.

Typically, liability accounts will include the word “payable” in their name and may include accounts payable, invoices payable, salaries payable, interest payable, etc. Liability accounts also follow the traditional balance sheet format by starting with the current liabilities, followed by long-term liabilities.