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Difference Between Assets and Liabilities

Difference Between Assets and Liabilities


Difference Between Assets and Liabilities

Comparison Chart

General MeaningAn asset is something which an individual or a company owns.A liability is something which an individual or a company owes.
Business MeaningAssets are those objects which are owned by the company having monetary value, immaterial of tangible or intangible.Liabilities are the debt or responsibility or an obligation owed by the company, having monetary value.
TypesCurrent Assets, Non-Current Assets.Current Liabilities, Non-Current Liabilities.
CalculationAssets = Liabilities + Owner’s EquityLiabilities = Assets – Owner’s Equity
ExampleBuilding, Cash, Goodwill, Account Receivable, Investments etc.Long term borrowings, Bank Overdraft, Account Payable etc.

Recommended Read: The Advantages and Disadvantages of Preference Shares

Definition of Assets

The economic value of anything which is owned by the company is known as Assets. In simple words, assets are those objects that can be converted into cash or it will generate income for the company in future years. It is helpful in paying out any type of debt or expense of the entity. Accounting divides assets into two broad categories which are-

Non-Current Assets

  • Tangible Fixed Assets
  • Intangible Fixed Assets
  • Long term Investments

Current Assets

  • Account Receivable
  • Inventory
  • Investments
  • Cash
  • Prepaid Expenses

Definition of Liabilities

The economic value of any type of debt or obligation owed by the company to any other individual or organization is known as liability. In simple words, the liabilities are those responsibility arising out of past transactions which is to be made payable by the company in the near future through assets owned by the entity. Accounting divides liabilities into two broad categories which are-

Non-Current Liability

  • Debentures
  • Long Term Loans

Current Liabilities

  • Short term Loan
  • Account Payable
  • Bank Overdraft
  • Outstanding expenses

Difference Between Assets and Liabilities


Difference Between Assets and Liabilities

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