What Is The Difference Between Assets And Liabilities?

An asset relates to something that is of value to you, or something that has some sort of economic benefit, either now or in the future.  In contrast, a liability is the negative aspect of this value, such as the amount of debt that may have incurred from the purchase of this asset. An example of an asset and liability is when you purchase a house. The house that you have purchased would be of a standard value depending on the position of the market in relation to the economic climate. Over a period of time this property will begin to increase in value, thus relating directly to the concept of an asset. Yet, in terms of liabilities, if the house was not bought outright and a loan was taking out in order to cover the costs, then this loan would represent the debts or liabilities that have been incurred from the purchase of the said asset.

There are numerous different types of assets, including, cash or cash equivalent assets, inventories, accounts receivable and prepaid expenses. Other forms of assets can be categorised as noncurrent assets or non-fixed. These types of assets include property and equipment, investment property for example real estate, intangible, financial assets which relate to different types of investment and biological assets which refer to living animals or plants.  In comparison, liabilities can encompass payable accounts, provisions for warranties or court decisions, financial liabilities such as cooperate bonds, liabilities and assets for current tax and unearned revenue. 

In order to organise and keep updated on you assets and liabilities, particularly in terms of property assets, a balanced sheet can be used. A balance sheet or a statement of financial position is the summary of the financial balances of a sole proprietorship, a business partnership or a company. Many businesses have assets which are seen as a type of investment that cannot be turned into cash immediately. Furthermore, these businesses often owe money to suppliers or tax owners, so in other words these businesses have financial liabilities.

Assets are what the company owns and
liabilities are what the company owes to its customers

Assets

Basically, assets are things you want to have, and liabilities are things you want to limit. Assets are things that create wealth. They grow in value and can provide some sort of return on your investment. A house is often considered an asset (but only if it is appreciating in value). Your investment portfolio is an asset; it grows and yields a return. Even your savings account is an asset, since the interest yielded does provide income

Liabilities

These are items that do not give you anything back in terms of monetary reward. Liabilities take your wealth. This is not the same as things like food. You need food to live. It is not really something you own. Items that are permanent, but that drain money away are liabilities. Sometimes they are necessary. Many people would find life extremely difficult without a car. But it is a liability. You put money into it (and the interest adds up too!), but the car still depreciates in value.

An asset is tangible and intangible property that you own that can be converted into cash. A liability is basically a legally binding obligation to settle a debt. Good example would be my house being an asset because I can sell it for cash and a liability would be the loan I have out for the house.

Asset this is the property that you own. While liability is an obligation to settle a debt.