Distinction between short term and long term liabilities

Liabilities are normally divided into two subgroups on the balance sheet. There are other subgroups within those groups, but the major distinction that’s done with liabilities is dividing them into either as short term or long term liabilities.

Short term liabilities are those that you’re required to settle within the next 12 months from the balance sheet date. It’s not just being required to settle, but also having no right to settle after the next 12 months due to non-compliance with some covenants from the agreement whereby the balance can be asked by the creditor to be settled within a very short timeframe.
A long term liability is any liability that’s to be settled after this 12 month period. It should be noted that each period a portion of a long term liability is usually transferred to the short term liabilities group to reflect of the amount required to be settled within next 12 months.

As it is, it’s important to distinguish a short term portion of an otherwise long term balance. Something to note is that part of a specific balance can be shown both within the short term liabilities and within the long term liabilities.