Assets and Liabilities
5paisa Research Team
Last Updated: 01 Jan, 2025 10:21 AM IST

Content
- What Are Assets And Liabilities?
- Assets
- Liabilities
- Different Types Of Assets And Liabilities
- Top Differences Between Assets and Liabilities
- Financial Ratios: The Relationship Between Assets and Liabilities
- Conclusion
Assets and liabilities are the most common accounting terms determining a business’s value. Every company, private or public, must maintain records of all the business transactions and create a balance sheet that details how many assets and liabilities a business has while operating.
The difference between assets and liabilities is the equity of the business. Every tangible or intangible receivable with monetary value is an asset, and every payable for the company is a liability. For example, when a company sells a product, they categorise the amount received as an asset in the balance sheet. In contrast, the company will add a payment made to a supplier to the liabilities section.
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Frequently Asked Questions
Some examples of assets are cash, cash equivalents, patents, trademarks, and machinery, while some examples of liabilities are debt, borrowings, taxes, and overdrafts.
An asset is something a business owns which has monetary value and helps the business to generate revenue. On the other hand, liabilities are expenses and payables a company must pay outside the business.
Current liabilities are obligations a business must pay within a short period, usually within a year or less. These are short-term debts or financial obligations to be settled using current assets such as cash, inventory, or accounts receivable.
Something is a liability if you owe, borrow from, or have to pay someone else using your business’s cash or cash equivalent.
Current liabilities are short-term obligations a business must repay within a year. On the other hand, the repayment obligation for long-term liabilities is over a year.