In accounting and business terms, students might have come across these terms, assets and liabilities. Assets comprise of such items that can be comprehended as the components of the property, which a company or an individual owns. They possess a certain worth and which can be used to meet their respective accountabilities such as commitments, legacies and debts. Liabilities refer to the accountabilities of an entity or individual, which is necessary to be accomplished.
What are Assets?
The economic value of an item which is possessed by the enterprise is referred to as Assets. To put it in other words, assets are those items that can be transformed into cash or that generates income for the enterprise shortly. It is useful in paying any expenses of the business entity or debt.
What are Liabilities?
The economic value of an obligation or debt that is payable by the enterprise to other establishment or individual is referred to liability. To put it in other words, liabilities are the obligations that are rising out of previous transactions, which is payable by the enterprise, through the assets possessed by the enterprise.
This article is a ready reckoner for all the students to learn the difference between Assets and Liabilities:
What does it mean?
|Assets are items possessed by a business that will provide it benefits in future.||Liabilities are items that are obligations for a business|
Impact of Depreciation
|Assets are depreciable in nature||Liabilities are non-depreciable in nature|
|Assets = Liabilities + Shareholder’s Equity||Liabilities = Assets – Shareholder’s Equity|
Impact on cash flow
|It is responsible for generation of cash flow for a business||It is responsible for outflow of cash from a business|
|The different types of assets are tangible, intangible, current and noncurrent||The different types of non-current liabilities are long term(non-current) and current liabilities|
|Cash, Account Receivable, Goodwill, Investments, Building, etc.,||Accounts payable, Interest payable, Deferred revenue etc.|
The above mentioned is the concept, that is elucidated in detail about ‘Difference between Assets and Liabilities’ for the Commerce students. To know more, stay tuned to CoolGyan’S.
Additional Reading: List of Current Assets
Frequently Asked Questions
What are the types Of Assets?
- Current Assets
- Non-current Assets or Fixed Assets
- Tangible Asset
- Intangible Assets
What Are The Classification Of Assets?
Assets can be classified into 2 major classes: tangible assets and intangible assets.
State 1 Difference Between Goods And Assets.
- Goods are always tangible in nature whereas assets can be both tangible and intangible in nature.
Give 4 Examples Of Liabilities.
- Short-term loans
- Salaries Payable
- Bank Overdrafts