What is the definition of a liability?

A liability is a financial obligation or debt that an individual or organization owes to another party. It can arise from various transactions, such as loans, Accounts Payable, or other contractual commitments. Liabilities are recorded on the balance sheet and are classified as either current (due within a year) or non-current (due beyond a year). They represent claims against the entity's assets, impacting its overall financial health.