Assets vs Liabilities
Assets vs Liabilities asome explaining Controlling your money flow with proper knowledge and understating of the finance rules could be the biggest challenge for you, especially if you are from a non-business background. If you are going for an interview in a bank or any other company or organization that takes care of the assets or cash then you should at least know what are Assets, Liabilities and their difference. So, in this brief article, we are going to talk about this topic in a thorough way so you have at least a clear image of these to topics afterwards.
What is Basic Difference and Proper use of These Terms
Here a good read about clasisification of liabilities: https://money-succes.com/classification-of-liabilities-html/
Before we go any further, you should at least know the basic difference definition of these two terms. So, Assets are those things or objects that a company holds in its ownership. Many people think that assets are always tangible and do not exit virtually but they are wrong because a reputation earned by a specific company also falls under their assets. For example, if one day Facebook decides to sell their company, they will not charge their potential customer for database, data centre, office, website domain only, in fact, they will also be charging for their best reputation in the online community that they have earned after decades of hard work. In short, assets are the goods, property or objects that are fully owned by a person or a company.
Let’s talk about liabilities, liabilities are contrary to the assets. Liabilities are for examples things that are not owned by a person or a company, in fact, liabilities are actually payables. In simpler words, liabilities make a company legally under the responsibility of returning the equal amount of the liability. This liability could be a product, service, object or anything else that takes you under legal responsibility of some debt.
Difference between liability and Assets
After reading above concept of both these terms, what do you think should be the difference between assets and laities? The difference is pretty clear. An asset results in benefit for a business while liability is an obligation for that business. In other words, more liabilities mean more burden on the overall economy of any business while on the other hand, more assets mean a business is strong and running its own profit. More liable companies tend to go in a loss more than other companies having some good count of assets. A liability will always have to be paid in present or in future.
Do Liabilities increase with time?
Value of assets goes down with the passage of time. It all depends on the depreciation time period of that asset while on the other hand, the value of the liabilities does not go down until and unless you pay them. Value of liabilities can go up, depending on the contract type that was signed, for example, while acquiring money from a third party or bank.