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What are Assets and Liabilities in Accounting? | Definition and Example

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, which 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 in order to recognize a liability, the transaction or event that is committing us to transfer assets or providing 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 vs 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 the value I mean money still many often miss the difference between the two here's a classic example is 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 on a monthly basis 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 why 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.

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