Assets and liabilities are the two major entities that find an entry in a business’s balance sheet for measuring its wealth. Assets are items owned by the business firm that have certain monetary value and will result in future benefits in the form of service and and/or cash flows. Two common assets are accounts receivable and business property. Accounts receivable is an example for current asset which indicates the money owed to the business by its customers. Business Property is an example for fixed asset which indicates the physical property that houses the plant, equipment and other resources required to operate.
Liabilities are the amount owed by the business to its creditors. Accounts Payable and Mortgages and loans are two common examples for liabilities. Accounts Payable is the money generated from purchases which are bought on credit. Mortgages and loans are long-term liabilities which require business to pay fixed amount of money over stipulated periods, usually more than a year.
1. Williams C. (2007). Management (4th ed., ). Thomson South Western.