Liabilities are debts your arts and crafts business owes to other businesses or people. Current liabilities include debt that you will pay back with cash within 12 months. This includes accounts payable, trade payables, business credit card debt and customer deposits.
Trade payables are purchases on account your arts and crafts business makes with companies supplying you with the raw materials you use to make your products. Customer deposits are any money you require your customer pay upfront before you start a custom job. For example, if you make jewelry for a bridal party, you may require a 50% deposit before you order the jewelry-making supplies
Payroll liabilities are also current. These accounts reflect the FICA, Medicare, and federal and state withholding tax taken out of your employees' payroll checks. It also shows the employer's share of FICA and Medicare. State sales tax you've collected is also a current liability as you need to remit it to the state within a certain amount of days after the end of the month you collect it.
Long-term liabilities is debt that is payable in the future further out than 12 months such as a note on your business car. Your business line of credit is probably a long-term liability as well.
