12-31-2023, 01:33 PM
Assets and liabilities are two sides of the balance sheet equation, reflecting what an entity owns and owes, respectively. Understanding the composition and relationship between assets and liabilities is crucial for assessing an entity's financial health and stability.
1. Ownership: Assets represent what an entity owns or controls, while liabilities represent what an entity owes to others.
2. Future Impact: Assets are expected to provide future economic benefits to the entity, whereas liabilities represent future sacrifices of economic benefits.
3. Position in Financial Statements: Assets are recorded on the left side (debit side) of the balance sheet, while liabilities are recorded on the right side (credit side). The balance sheet follows the accounting equation: Assets = Liabilities + Equity.
1. Ownership: Assets represent what an entity owns or controls, while liabilities represent what an entity owes to others.
2. Future Impact: Assets are expected to provide future economic benefits to the entity, whereas liabilities represent future sacrifices of economic benefits.
3. Position in Financial Statements: Assets are recorded on the left side (debit side) of the balance sheet, while liabilities are recorded on the right side (credit side). The balance sheet follows the accounting equation: Assets = Liabilities + Equity.