Financial liabilities are obligations that a company owes to external parties, as a result of past transactions or events, which are required to be settled in the future. These obligations are typically in the form of payments of money, delivery of goods, or services. Examples of financial liabilities include borrowing money in the form of loans or issuing bonds, trade payables due to suppliers, or any amounts payable for rental agreements or services received.

For instance, if a company takes a loan from a bank, the owed loan is recorded as a financial liability because the company is required to repay the principal along with interest. Similarly, when goods or services are purchased on credit, the owed amount to the supplier represents a financial liability until it's settled. These obligations are an essential part of a company's balance sheet, classified as current or non-current liabilities depending on when they are expected to be settled.

Managing financial liabilities effectively is crucial for a company’s financial health, as excessive liabilities relative to assets can signal financial distress and affect key metrics such as liquidity ratios and leverage ratios. Utilizing accounting tools such as month-end reconciliations helps in accurately tracking and reporting these liabilities.