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 :
|Meaning||The economic value of an item which is possessed by the enterprise is referred to as Assets||The economic value of any obligation or debt owed by the enterprise to any other establishment or individual is referred to as a liability|
|Calculation||Assets = Liabilities + Owner’s Equity||Liabilities = Assets – Owners Equity|
|Position in Balance Sheet||Right||Left|
|Types||Non-Current Asset, Current Assets||Non-Current Liabilities, Current Liabilities|
|Example||Cash, Account Receivable, Goodwill, Investments, Building, etc.,||Bank Overdraft, Account Payable, Long term borrowings, 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 BYJU’S.