What is assects in commerece
Chikkamagaluru
Answers
Answer:
Assets and liabilities play an important role in the long term viability of a business.
Answer:
Assets and Liabilities
In this article [hide]
What are Assets and Liabilities?
Different Types of Assets and Liabilities?
Relationship between Assets and Liabilities – A Glance through Financial Ratios
What are Assets and Liabilities?
Both assets and liabilities tend to play a vital role when it comes to ensuring the profitability of a business or its long-term viability. The key to ensure the same depends on how well a company can manage them effectively. Further, to achieve satisfactory outcomes, individuals who have to deal with assets, as well as liabilities regularly, must learn about these aspects in detail.
In a broader sense, all receivables are categorised as assets while the payables are categorised as liabilities. Another way to look at them is by segregating them based on profit and loss. For instance, the investments via which profit or income is generated are typically put under the category of assets, whereas, the losses incurred or expenses paid or to be paid are considered to be a liability. At a glance, the best examples of assets and liabilities would comprise cash and bank debt, respectively. Now, let’s take a detailed look at the two.
Assets
The term ‘asset’ signifies all kinds of resources that help generate revenue as well as receivables. Assets are resources which often help to reduce expenses, enhance profitability and generate robust cash flow as they help convert raw materials or can be converted into cash or cash equivalents. Further, being of economic value, they can be quickly sold or exchanged. Notably, such resources are reported on the left side of the Balance Sheet that is maintained by any entity involved in commercial practice.
Generally, the sum of total liabilities and equities owned helps compute the value of assets. Consequently, it can be said –
Formula: Total assets = Liabilities (accounts payable) + Owner’s equity
Liabilities
The term liability signifies all types of account payables. It can further be defined as a financial obligation that individuals must meet. Usually, the liabilities tend to play a significant role when it comes to financing expansion or ensuring smooth processing of everyday operations of commercial practices.
Further, depending on the type of a company, such liabilities can either be limited or unlimited. In the case of the former, owners are not entirely obligated to compensate or pay off for the venture’s liability, whereas in the latter, the resulting liability is solely the responsibility of the owners. The obligations of a commercial entity are reported on the right side of the Balance Sheet.