What does liability and assets actually mean in accounting?i am in 11th and have just started my session n during my accounts class this question has been bugging me...
Accounting is the way in which businesses and individuals track their resources and how they increase or decrease over time.
Liabilities are reasons why the amount of resources might decrease. A liability could be a payment owed, an investment that is loosing money at the moment, a factory that is out of production for some reason so isn't producing goods that could bring income to a company, and so on.
Assets are factors that increase the value of holdings. A large supply of raw materials ready to be turned into finished products is an asset. Money in the bank is an asset. Stocks that are increasing in value are assets.
Assets are the things or say properties owned by the business whereas liabilities are the obligations or debts payable by the enterprise .Thus it it is the creditors claim against the assets of the business.
lets take an example say a businessman purchased a land or say inventory in which he deals , these are assets as these are owned by him , which helps him in doing his business
on the other hand say he buys inventory on credit . thus he has created a liability or he owns money to the creditors which is payable on certain day.
thus inventory is asset as owned but creditors from whom we purchased inventory are liabilities as we have a obligation towards them and who has claim on our assets.
assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).
A liability can mean something that is a hindrance or puts an individual or group at a disadvantage, or something that someone is responsible for, or something that increases the chance of something occurring