What does the term 'liabilities' refer to in accounting?

In accounting, the term 'liabilities' specifically refers to what the company owes to others. This includes debts and obligations that the company is required to settle in the future, such as loans, accounts payable, mortgages, and other financial commitments. Liabilities are important in assessing the financial health of a business, as they represent the external claims on the company's assets.

By understanding liabilities, stakeholders can gauge how much of the company's resources are tied up in obligations that need to be fulfilled. This concept is critical in the context of the accounting equation, which states that Assets = Liabilities + Owner's Equity. This equation highlights how liabilities form a significant part of the company's overall financial structure, as they are balanced by the assets that the company owns and the equity contributed by its owners.

Other choices address different aspects of a company’s finances but do not accurately represent liabilities. The owner's stake in the company pertains to equity, what the company owns is classified as assets, and income generated from sales relates to revenue. Each of these components plays a distinct role in financial accounting but does not define what liabilities are.