A liability is an obligation or legal debts that a company owes and these arise as a result of the firm's day to day operations.
Liabilities can be classified into two categories:
1) Real/Definitely determinable liabilities - These are liabilities where the exact amount of the liability is known and the timing of when the liability occurs is known. Examples of these include Accounts payable and dividends payable. With these, the amount of the liability is pre-determined and fixed and can be directly determined with no need for estimation.
2) Estimate liabilities - These are liabilities for which the exact amount and timing of the liability is unknown. An example of an estimate liability is warranty liability because a firm is never really sure when its customers will claim warranty on a product and when this clai will take place. Another good example of this is income taxes payable - a firm can never determine how much they owe in income taxes as the amount owed varies significantly depending on how much income they generate in a period.