homenewedit

Assets and Liabilities

304 views
updated 12 Jan 2023

Assets and liabilities are financial terms that refer to the resources a company has available to it and the obligations it owes to others, respectively.

Assets are anything that a company owns that has monetary value, such as cash, investments, equipment, real estate, inventory, and accounts receivable (money owed to the company by customers). They can be grouped into two main categories: current assets (cash, accounts receivable, inventory, etc.) and fixed assets (property, plant and equipment, etc.).

Liabilities, on the other hand, are obligations that a company owes to others, such as loans, accounts payable (money the company owes to suppliers), taxes, and wages. They can also be grouped into two main categories: current liabilities (short-term debt, accounts payable, etc.) and long-term liabilities (bonds, long-term loans, etc.).

The difference between a company's assets and liabilities is known as its net assets or equity, which represents the value of the company that is owned by shareholders. If the value of a company's assets exceeds its liabilities, the company is said to have a positive net worth. If the value of the company's liabilities exceeds its assets, the company is said to have a negative net worth.

In summary, assets are the resources that a company has available to it, and liabilities are the obligations it owes to others. Together, they make up a company's balance sheet, which is a snapshot of the company's financial position at a specific point in time.