Which of the following best defines debt?

The definition of debt is best captured as a liability or obligation in the form of a loan. Debt arises when an individual borrows money or receives goods and services with the understanding that they will repay the lender over time, usually with interest. This concept is fundamental in finance as it reflects the responsibility of the borrower to repay the borrowed amount to the lender, whether it is through traditional loans, credit cards, or other forms of borrowing.

In this context, recognizing debt as a liability emphasizes its nature as an obligation rather than an asset. Unlike assets, which provide value or can generate income, debt represents a future financial obligation that must be settled. Understanding this core concept helps individuals manage their financial responsibilities effectively and make informed decisions about borrowing and repayment strategies.