Guiding Questions
This blog explains two important accounting terms people often confuse:
- What are assets?
- How are liabilities different?
Assets
Assets are things a business owns that have value.
- Cash: Money available for use
- Inventory: Products available for sale
- Equipment: Tools and machines used in operations
Liabilities
Liabilities are obligations or debts a business owes.
- Loans: Borrowed money that must be repaid
- Accounts Payable: Money owed to suppliers
- Rent Payable: Rent that is due but unpaid
Why The Difference Matters
Knowing the difference helps determine financial stability. A business with more assets than liabilities is generally financially healthier.
Review
- What is an example of an asset? Cash
- What is an example of a liability? Loan
- Which represents ownership? Assets
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