Similarities & Differences Between Assets And Liabilities

1. Assets are the useful resources of the business that provide probable future benefits to the business owned by it while Liabilities are the rights of outsiders, like Sundry Creditors / Accounts Payable, Banks, and other financial institutions, to the assets of the business.

2. Assets mainly can be divided into two types, namely Current Assets and Non Current Tangible Assets / Fixed Assets / Long-Term Assets while Liabilities include Current Liabilities and Non Current Liabilities / Long-Term Liabilities.

3. Assets are recorded on Assets side on Balance Sheet while Liabilities are shown on Liabilities & Equity Side on Balance Sheet.

4. According to the Rules of Debit And Credit, the normal or usual balance for assets is debit. When these increase i.e. when we purchase these or added cost to them (Capital Expenditure), then we debit these one but when these decrease as sold out old furniture due to obsolescence or any other reason or when we close assets accounts at end of accounting period, then we credit these one. While in case of Liabilities, these have normal balance on Credit side, when these increase i.e., when we increase a liability, then we credit these in the books of accounts, but when these decrease, then we debit these one and it means that we pay off our liability or debt or close the accounts of liabilities.

5. From the Accounting Equation, assets are equal to the sum of Liabilities + Equity while Liabilities are equal to the Difference Between Assets And Equity i.e., Asset - Equity.

Relationship & Similarities Between Assets And Liabilities

1. Both have balances and shown on Balance Sheet and reported to the Users of Financial Statements through Financial Reports at the end of the accounting period.

2. Investors are interested in assets to liabilities ratio (Total Liabilities / Total Assets) in order to invest in the business of a company.

So, Assets are the rights owned by the business while liabilities are the rights of outsiders against the assets of the business.