Assets vs Liabilities

Front

What is the definition of an asset?

Back

An asset is a resource owned by an individual or entity that is expected to provide future economic benefits.

Front

What is the definition of a liability?

Back

A liability is a financial obligation or debt that an individual or entity owes to another party.

Front

Give an example of a liquid asset.

Back

Cash is an example of a liquid asset because it can be easily accessed and used for transactions.

Front

What is the difference between current and non-current assets?

Back

Current assets are expected to be converted into cash or used up within one year, while non-current assets are long-term investments that will provide value over a period longer than one year.

Front

What is an example of a current liability?

Back

Accounts payable is an example of a current liability, as it represents money owed to suppliers that is due within a year.

Front

How does credit card debt classify in terms of assets and liabilities?

Back

Credit card debt is classified as a liability because it represents money that must be repaid.

Front

What is the impact of owning a house on personal net worth?

Back

Owning a house increases personal net worth as it is considered an asset that contributes to overall wealth.

Front

What are intangible assets?

Back

Intangible assets are non-physical assets that have value, such as patents, trademarks, and goodwill.

Front

What is the role of income tax in liabilities?

Back

Income tax represents a liability because it is an obligation to pay taxes owed to the government.

Front

How do assets and liabilities affect financial statements?

Back

Assets and liabilities are reported on the balance sheet, where assets must equal liabilities plus equity, reflecting the financial position of an entity.