[MUSIC] Last time we talked about the asset side of the balance sheet which reports to users of the company's resources. In this video, we will discuss where a company gets some of these resources from, namely the liability side of the balance sheet. This will include looking at the two parts of liabilities; current and non-current liabilities, and their various constituents. We will continue to use Amazon's balance sheet from December 2015 to better understand liabilities. Similar to assets, liabilities are also separated into current and non-current liabilities. Obligations that are due within the next one year are classified as current liabilities and everything else is called non-current liabilities. Examples of current liabilities are accounts payable and short-term borrowing. Examples of non-current liabilities are long-term debt and long-term lease obligations. Let's take a detailed look at the key items that constituent our current liabilities. The first item under current liabilities is accounts payable. This is how much the company owes its vendor and suppliers for products and services that they have already provided or delivered. It represents how much products and services the company has purchased on credit. These are expected to be paid off by the end of the year. Amazon had accounts payable of $20.40 billion at the end of 2015. A second item on the current liabilities is accrued expenses. These are expenses that the company has incurred, but has not yet received an invoice for. Examples of accrued expenses are wages, interest, and utilities. The company has incurred these expenses as of the balance sheet date, but it has not yet received a invoice for these expenses. Wages will fall under accrued expenses, if payroll for that period has not yet been processed. As of the end of 2015, Amazon had accrued expenses of $10.38 billion. Amazon's annual report notes that these accrued expenses are primarily related to unredeemed gift cards, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses. The third item under current liabilities is unearned revenue. This is how much customers and clients have paid in advance for the company's products or services. This will continue to be a liability for the company until it delegates the promised products or services. At the end of 2015, Amazon had unearned revenues of 3.12 billion dollars. Its annual report notes that unearned revenues primarily relates to pre-payments of Amazon Prime memberships and Amazon web services. Adding all three components gives the company's current liabilities, all of which are obligations due within one year. Amazon's current liabilities for the year ending 2015 are $33.90 billion. Moving on to non-current liabilities, the largest contribution is from long-term debt. This includes loans and bonds, all of which are due to be paid after one year. At the end of 2015, Amazon had long-term debt worth $8.23 billion. Other long-term liabilities were $9.93 billion at the end of 2015. It\s annual report reports that the long-term liabilities primarily consist of long-term lease obligations, tax contingencies, and long-term deferred tax liabilities. Remember, all of these obligations are due after one year for them to be counted as non-current liabilities. Amazon's total non-current liabilities at the end of 2015 add up to $18.16 billion. Adding this to its current liabilities of $33.90 billion, Amazon had liabilities what are total of $52.06 billion due at the end of 2015. Previously we saw that Amazon had total assets of $65.44 billion, which is how it had used its resources. Liabilities provided $52.06 billion of the required resources. Where does the balance 13.37 billion in resources come from? We will talk about this next time. [MUSIC]
