Dictionary / Financial statements
Assets and Liabilities
Assets are things a company owns that have value. Liabilities are what it owes to others. Assets minus liabilities is what belongs to the owners.
Examples of assets
- Cash in the bank.
- Money customers still owe, called accounts receivable.
- Goods in the warehouse, called inventory.
- Buildings, machines and land.
- Patents, brands and goodwill.
Examples of liabilities
- Bank loans and bonds, meaning debt.
- Bills owed to suppliers.
- Wages and taxes not yet paid.
- Money customers paid in advance for things not yet delivered.
Current vs long-term
Current means due or usable within a year. Long-term means later. Comparing current assets with current liabilities shows whether a company can pay its near-term bills; see current ratio and working capital.
Where they appear
Both are listed on the balance sheet. The difference between them is the owners' equity, also called book value.
Related terms
Balance sheetShows what a company owns and owes.
Book valueWhat the company is worth on paper.
Working capitalShort-term money a company has to run day to day.
Current ratioCan the company pay its bills this year?
DebtMoney a company has borrowed and must pay back.
Debt-to-equityHow much debt compared with owners' money.