What is the asset?
The asset represents all the assets and rights that a company or person owns at a given time. It can be classified into current assets and non-current assets. Current assets are those that can be converted into cash in a short period of time, for example, cash on hand, accounts receivable, among others. While non-current assets are those that cannot be converted into cash in a short period of time, for example, machinery, buildings, among others.
What is passive?
Liabilities are the set of debts and obligations that a company or person has at a given time. It can be classified into current liabilities and non-current liabilities. Current liabilities are those debts and obligations that must be paid in a short period of time, for example, accounts payable, short-term loans, among others. While non-current liabilities are those debts and obligations that must be paid over a long period of time, for example, long-term loans, employment obligations, among others.
What is heritage?
Equity is the set of assets and rights that a company or person owns, less the set of debts and obligations it has at a given time. That is, equity is what remains after subtracting obligations from assets. It can be classified into share capital, reserves and retained earnings. Social capital is the contribution of the partners or shareholders to form the company. Reserves are the profits retained during the time in which the company has operated and have not been distributed among the partners or shareholders. Retained profits are the profits that the company has generated in its operation.
What is the importance of knowing the difference between assets, liabilities and equity?
Knowing the difference between assets, liabilities and equity is important because it allows you to know the true financial situation of a company or person. That is, it allows you to know how much money a company or person owns, how much it owes, and how much really belongs to it. In addition, it allows you to make correct financial decisions, such as obtaining credit or making investments.
Summary
- The asset is the set of goods and rights that a company or person owns.
- Liabilities are the set of debts and obligations that a company or person has.
- Equity is the set of assets and rights that a company or person owns, less the set of debts and obligations.
I am Sebastián Vidal, a computer engineer passionate about technology and DIY. Furthermore, I am the creator of tecnobits.com, where I share tutorials to make technology more accessible and understandable for everyone.