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What are Assets and Liabilities in Accounting? Definition and Example
A House An Asset Or A Liability? [ Finally Explained ]
Is a house an asset or a liability? That is one of the biggest questions many people have when they think about buying a house.
It is important to understand real estate in terms of assets and liabilities and the different ways you can buy a house so you will no longer wonder Should I buy a house?
In this video, we are going over 3 main ways we can buy real estate and how each one affects your finances so you know how to invest in real estate.
You’ll learn how to build home equity in a property without using your own money. You’ll also learn when a house is considered an asset or a liability.
What are Assets? (Let's Break Them Down)
Discover what Assets mean in Accounting.
In this Accounting tutorial, you’ll hear the definition of Assets in Accounting. I'll also take you through the common types of Assets that are worth knowing about.
What are assets? Assets of one of the three pillars of the Accounting Equation alongside liabilities and equity. They're hugely important because they are what businesses use to operate and generate a profit.
Assets are probable future economic benefits obtained or controlled by a particular entity as the result of past transactions or events.
Say what? I know, what on earth does that mean?
Let's break the definition down and try to make some sense of it. The first word that stands out to me is ‘probable’. Assets are probable future economic benefits.
The word ‘probable’ carries with it a degree of uncertainty and I want to emphasize this because I think that often we take numbers for granted.
Without questioning them. The reality is that the future is uncertain and a lot of the time we accountants have to make estimates.
What Are Liabilities? (SIMPLE Explanation)
Discover what Liabilities mean in Accounting.
In this Accounting tutorial, you’ll hear the definition of Liabilities in Accounting. I'll also take you through the common types of Liability that are worth knowing about.
Liabilities are probable future sacrifices of economic benefits arising from the present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.
What the? I thought the assets definition was bad, but this is something else. Let's break it down and see if we can make any sense of it. Liabilities are probable future sacrifices of economic benefits.
The word probable hints at uncertainty. When dealing with liabilities, we accountants often have to use our own judgment of situations to estimate future outcomes.
This is especially the case with accruals, which I'll get into later in this video. Future sacrifices mean that we're going to need to give up something in the future. And what are we gonna give up? Economic benefit relates to the things that have value, or more specifically, assets and services.
And that doesn't only mean cash. This definition also says that liabilities are present obligations resulting from past transactions or events. So to recognize a liability, the transaction or event that is committing us to transfer assets or provide services must have happened already.
A simpler way to think of liabilities is that they are a source of third-party funding that a business uses to buy assets and fund operations. If we bring that accounting equation back up, then we can see that businesses have two broad financing options to choose from when buying assets.
what are the differences between Assets and Liabilities?
Assets vs Liabilities and how to generate assets. Assets are things that put money in your pocket. Liabilities take money out of your pocket. Sounds simple enough, right? In this video, I’m going to explain to you exactly what assets are, as well as the difference between assets and liabilities, and how you can acquire assets.
I'm going to teach you the difference between assets and liabilities in more detail and then I'm going to tell you how to acquire more assets and acquire fewer liabilities.
The difference between assets and liabilities is not to be confused the definition of an asset is very simple.
In financial accounting, it is anything that can be utilized to produce value, and obviously, by value, I mean money still many often miss the difference between the two here's a classic example a house is an asset some think that buying a home is an asset.
unless you plan to sell the property it is a liability and a pretty big one it's going to take money away from you for years to come due to the mortgage not to talk about all the maintenance costs that you're going to sustain every month that's not putting money in your pocket.
if you ask me on the other hand if you plan to resell the property at a higher price that can be considered an asset you can also call assets.
Investments if you pay to acquire because investments are anything that can bring a measurable return on an initial payment for example acquiring stocks or shares and bonds is acquiring assets because they will generate money for you via dividends or you can resell them and generate profits through capital gains.
FAQs Related Questions & Answers :)
Introduction to Accounting. | What is accounting?
Accounting is a useful way of recording and summarizing financial information. Businesses use accounting to keep their financial information organized which helps them in making sense of their financial data and also keeps them compliant with financial regulations. Learn More.
A House An Asset Or A Liability? [ Finally Explained ]
Is a house an asset or a liability? That is one of the biggest questions many people have when they think about buying a house.
It is important to understand real estate in terms of assets and liabilities and the different ways you can buy a house so you will no longer wonder Should I buy a house? Learn more.
What is The Accounting Equation?
It is a basic but also a very important accounting principle, so what is the accounting equation? LEARN MORE.
so what is the accounting equation? I’m Thomas Harwood and Welcome to The Accounting Student, where we create free and short videos Learn more.
What is Revenue Expenditure? | ACCOUNTING
A company will have different types of expenditure, how will revenue expenditure be treated in the accounts?
what is revenue expenditure? Usually, a business will have cash coming in, which can be known as income, and cash going out which can be referred to as expenditure. Learn more.
Accounting Equation
The accounting equation is one of the fundamental elements of double-entry accounting and the foundation for all of the concepts learned in introductory accounting. In this short video, you will learn what the equation is and what each part represents.
This video was created about the Utah State CTE standards for the Accounting I High School course. Specifically, this video prepares students to complete Strand 2, Standard 2: Demonstrate an understanding of the fundamental accounting equation. Learn more.
Accounting Process for Transaction Analysis - WorldWide Webster
On the accounting process, you'll recall from class the accounting process has three major steps. Learn more.
Journal Definition - What is a Journal?
The Journal definition includes a breakdown of areas in the definition. Analyzing the definition of key terms often provides more insight into concepts.
The term journal can be defined as a Record in which transactions are entered before they are posted to ledger accounts; also called the book or original journal. Learn more.
What is a General Ledger? (Recording Nonprofit Transactions)
What is a general ledger? A general ledger is a list of transactions by account. In this lesson, you’ll learn what transactions are, how and when to record them, and how they impact your nonprofit's accounting system. Learn more.
Depreciation explained
What is depreciation? How to calculate depreciation? Depreciation, amortization, and CapEx tutorial.
Overview of depreciation accounting (concept and application), and related topics such as accumulated depreciation, book value, residual value, historical cost, fixed assets, amortization, useful life, capital expenditures (CapEx), and capitalization. Intended for students and business people at both entry and advanced levels. Learn more.
The TRIAL BALANCE Explained (Full Example!)
Learn how to prepare a Trial Balance using T Accounts and Journal Entries. The Trial Balance is made easy in this episode of Accounting Stuff - Accounting Basics for Beginners Lesson 5 - you will learn: Learn more.
Introduction to Accounting. | What is accounting?
Accounting is a useful way of recording and summarizing financial information. Businesses use accounting to keep their financial information organized which helps them in making sense of their financial data and also keeps them compliant with financial regulations. Learn More.
A House An Asset Or A Liability? [ Finally Explained ]
Is a house an asset or a liability? That is one of the biggest questions many people have when they think about buying a house.
It is important to understand real estate in terms of assets and liabilities and the different ways you can buy a house so you will no longer wonder Should I buy a house? Learn more.
What is The Accounting Equation?
It is a basic but also a very important accounting principle, so what is the accounting equation? LEARN MORE.
so what is the accounting equation? I’m Thomas Harwood and Welcome to The Accounting Student, where we create free and short videos Learn more.
What is Revenue Expenditure? | ACCOUNTING
A company will have different types of expenditure, how will revenue expenditure be treated in the accounts?
what is revenue expenditure? Usually, a business will have cash coming in, which can be known as income, and cash going out which can be referred to as expenditure. Learn more.
Accounting Equation
The accounting equation is one of the fundamental elements of double-entry accounting and the foundation for all of the concepts learned in introductory accounting. In this short video, you will learn what the equation is and what each part represents.
This video was created about the Utah State CTE standards for the Accounting I High School course. Specifically, this video prepares students to complete Strand 2, Standard 2: Demonstrate an understanding of the fundamental accounting equation. Learn more.
Accounting Process for Transaction Analysis - WorldWide Webster
On the accounting process, you'll recall from class the accounting process has three major steps. Learn more.
Journal Definition - What is a Journal?
The Journal definition includes a breakdown of areas in the definition. Analyzing the definition of key terms often provides more insight into concepts.
The term journal can be defined as a Record in which transactions are entered before they are posted to ledger accounts; also called the book or original journal. Learn more.
What is a General Ledger? (Recording Nonprofit Transactions)
What is a general ledger? A general ledger is a list of transactions by account. In this lesson, you’ll learn what transactions are, how and when to record them, and how they impact your nonprofit's accounting system. Learn more.
Depreciation explained
What is depreciation? How to calculate depreciation? Depreciation, amortization, and CapEx tutorial.
Overview of depreciation accounting (concept and application), and related topics such as accumulated depreciation, book value, residual value, historical cost, fixed assets, amortization, useful life, capital expenditures (CapEx), and capitalization. Intended for students and business people at both entry and advanced levels. Learn more.
The TRIAL BALANCE Explained (Full Example!)
Learn how to prepare a Trial Balance using T Accounts and Journal Entries. The Trial Balance is made easy in this episode of Accounting Stuff - Accounting Basics for Beginners Lesson 5 - you will learn: Learn more.
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