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Fixed liabilities are those long term liabilities which a company has to pay after more than one year. It simply means that these liabilities become due for a business enterprise after one year.

The total figure of these liabilities is used to check the dependency of a firm over its long terms debt instruments. For this purpose, it is used in ‘Debt to equity ratio’, which indicates balance between equity and debt used by a firm to raise funds.

These liabilities are shown on the liability side on a balance sheet.

List of fixed liabilities:

• Debenture
• Bonds
• Mortgages
• Pension obligations
• Lease obligations
• Loans and advances from subsidiaries
• Loans and advances from banks
• Other long term loans and advances.

Issued share capital is that part of authorized share capital which has been issued by the company for subscription. Generally a company does not issue all of its authorized capital and keeps a part of it reserved. This is done so that the company can raise funds in future also by issuing the remaining part of its authorized capital. The part which has not been issued by the company is known as unissued share capital.

Example of issued share capital:

Lets assume that ABC ltd. got registered with a capital of INR 1,00,00,000 (1 crore) divided into shares of INR 10 each. The management decides to issue 8,00,000 (8 lakh) shares to raise a fund of INR 80,00,000 (80 lakh) but the investors subscribe for only 6,00,000 (6 lakh) shares. Now the company calls for only INR 4 per share out of INR 10 (Nominal value of shares) and it gets full amount for only 5,50,000 (5 lakh 50 thousand) shares.

Then

Issued share capital = Rs 80 lakh (8 lakh shares of Rs 10 each)

 From the figures given above it is clear that the amount of issued share capital for company ABC Ltd is Rs 80 lakh.

 

 

An obligation to pay a debt is called liability. Liabilities are recorded on the left hand side on a balance sheet.

On the basis of time period liabilities can be divided into two categories- current liabilities and fixed liabilities.

Liquid assets mean those assets which can be converted into cash immediately without much loss.

The above definition seems to define current assets. So what’s the difference between these two?

One has to abstract the amount of inventories and prepaid expenses from the total amount of current assets to arrive at required figure.

Formula for the calculation of Liquid Assets:

= Current assets – (Inventory + prepaid expenses)

Inventory and prepaid expenses are excluded from the scope of liquid assets because:

• Inventory can not be converted immediately into cash as and when required &
• Prepaid expenses cannot be converted into cash at all.

Application of the formula:

Let’s suppose that XYZ Ltd has following figures on its balance sheet under the head ‘Current assets’

Using the formula and figures, we can calculate the total current assets as follows:

Total current assets	1,15,000
Total amount of ‘Inventory’ and ‘Prepaid expenses’	22,000 + 5,000 = 27,000

Liquid assets = 1,15,000 – 27,000 = 88,000.

Liquid liabilities are debt obligations which a firm has to pay within a year.

These liabilities are calculated by deducting the amount of bank overdraft and cash credit facilities (these must be excluded only if they become a permanent mode of financing) from total amount of current liabilities.

Formula for the calculation of liquid liabilities:

Below formula can be extracted from the given definition:

Why these liabilities are calculated?

These liabilities are calculated to gauge the firm’s ability to meet its short term liabilities. The calculated figure of these liabilities is used in the calculation of ‘Acid test ratio’ or ‘Quick ratio’. This ratio directly indicates the ability of a firm to meet its short term debt obligations.