Distinguish between assets and liabilities and provide three (3) examples of each to support your arguments.
Distinguish between assets and liabilities and provide three (3) examples of
each to support your arguments.
Introduction:
Liabilities can be either short-term or long-term. Short-term obligations are sometimes referred to as current liabilities. Long-term liabilities are referred to as noncurrent liabilities.
Current liabilities include the following:
- Short-term obligations (e.g., credit card balances)
- Tax obligations (e.g., payroll taxes)
- Expenses incurred (e.g., received goods you purchased but have not received an invoice yet)
- Accounts receivable (i.e., unpaid invoices)
Companies might have both current and fixed assets (aka noncurrent assets). A current asset is a short-term asset, whereas a noncurrent asset is a long-term one.
Current assets include the following:
- Investments
- Inventory
- Money and its analogs (e.g., checking accounts)
- Accounts payable (aka unpaid invoices from customers)
Current assets may be turned to cash fast, usually in less than a year. Short-term investments are another word for current assets.
Noncurrent assets include the following:
- Property (e.g., buildings or cars)
- Equipment
- Trademarks or patents
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