What are assets and liabilities?

In accounting and business terms, students might have come across these terms, assets and liabilities. Assets comprise of such items that can be comprehended as the components of the property, which a company or an individual owns.

What are some examples of liabilities?

Some examples of liabilities include expenses such as loans, payroll, and accounts payable. Liabilities are also categorized, just as assets are, according to the time period when the debts are to be paid. Current liabilities refer to debts owed by the business that should be paid within the current fiscal year.

What is a business liability?

Liability can also refer to one's potential damages in a civil lawsuit. Businesses sort their liabilities into two categories: current and long-term. Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period.

Why is balancing assets liabilities and equity important?

Balancing assets, liabilities, and equity is also the foundation of double-entry bookkeeping —debits and credits. Without understanding assets, liabilities, and equity, you won’t be able to master your business finances. Debt could pile up even while cash is coming in fast.