Liability is any obligation of outflow of resources that we are obliged to recognize as a result of what we have done in the past. Any outflow of resources that has economic value that we are committed to take responsibility of is known as liability. There are various kinds of liabilities that one can think of. Some of such liabilities are discussed below:
WHAT IS PROFESSIONAL LIABILITY?
Professional liability is the obligation that professionals like; accountant, lawyers, medical doctors, etc face as a result of factors like; negligence, incompetence, carelessness, etc. Example of professional liability is the auditors’ liability. Auditors face a lot of liabilities as a result of not meeting the expectation of users of audited information.
WHAT IS GENERAL LIABILITY?
General liability is that liability that has no limit to claims on assets of defendants. It is likened to an open source application where what you can do with anything is limitless. General liabilities are common in the insurance sector where insured make claims on subject that has a general cover.
WHAT IS LONG TERM LIABILITY?
Long term liability is the liability that spans over a period that is longer than six months. Bank loans are good example of long term liability. Obligations that are longer than six months are generally known as general liabilities.
WHAT IS CONTINGENT LIABILITY?
Contingent liabilities are liabilities that are provided for based on anticipated obligations. The accounting standard has made it more stringent to meet the requirement of classifying an item as contingent liability. This legislation is important as many business executives misused the room to include contingent liabilities in what I call ‘lax’ policies. Note that for an item to be seen as a contingent liability, a legal commitment to give out economic value must have been established.
WHAT IS vicarious LIABILITY?
Vicarious liabilities are those types of liabilities that a principal take responsibility of as a result of the action of agent. It is assumed that principals monitor the activities of the agents to ensure that they don’t put them into trouble. It should be however noted that facts of a case in the law court can be distinguished. A liability that arise when an agent leaves his principals assignment and engage in personal venture will be distinguished as not being vicarious liability and borne by the agent.
WHAT IS PUBLIC LIABILITY?
Public liability is the phrase used to describe the nature of certain kinds of businesses is accountable to the general public. This is the direct opposite of the ‘limited liability company’. Corporations that are owned and controlled by the government fall within the class of public liability company.
The keywords and phrases to be recognized from anything/ present in anything that will called a liability are’ commitment’ ‘obligation’ ‘economic value’ and ‘it must be as a result of past action’
Any situation that lack these keywords and phrases cannot be said to be a liability. I hope that this article has been able to answer the question ‘what is liability?’