Many people think that liabilities are expenses, but they are not. A liability can be described as a loan you have with a financial institution or money that you owe to vendor suppliers, which is also called A/P. The primary difference between expenses and liabilities is that if you were to go out of business tomorrow, you would no longer have to pay expenses. Instead, you would stop making payments for utilities, and you would lay off employees to eliminate payroll expenses.
On the other hand, if you go out of business, you still have to pay your outstanding liabilities. They don't just disappear as expenses do. For example, if you have an outstanding loan with a bank, you still owe that money and will have to contact the financial institution to make payment arrangements. The same would apply to unpaid bills for products and/or services you received. This means you would have to contact the vendor/supplier and notify them you were going out of business in order to make payment arrangements.
