What are Assets and Liabilities | Types of Assets and Liabilities

If you want to start your Investing in any company then this article is only for you and In this article I will explain to you about what are assets and liabilities. It is very important to know for you and without knowing this full information you should never invest in any share market.

Whenever we talk about investing, we talk about company analysis. There are many things that we need to analyze before investing in any company and one of them is the balance sheet from which we can know the financial health of the companies but before analyzing the Balance sheet, one must know about its basic and that is Assets and Liabilities, because both are the actual components of balance sheet.

What are Assets and Liabilities

The profitability of any company depends on their assets and liabilities as well as how efficiently the company can manage those assets and liabilities.

All the receivables of companies are in the asset category and all payables are in the liabilities category. I think that the topic is about what is meaning of assets and liabilities will be very interesting to everyone as well as you can compare assets and liabilities difference, so must read it thoroughly otherwise you may not get complete information.

What are Assets

Generally we call assets all those things from which companies can generate revenue in the future whether in the long term or short term. Examples of assets are Cash balance of a compan y, factories, office furniture, patents, investment etc. Assets are those resources through which we can reduce our expenses and enhance our profitability.

Mainly assets of any company are of two types such as Current Assets or short term Assets and Non-current Assets or fixed Assets.

What is Current Assets

Current assets or short term assets are those assets which the company will use or convert into cash in a year.

Examples of current assets are given below,

• Short term investments means such investments which the company will convert into cash in a year.
• Account receivables means all those payments which the companies have to take from customers.
• Inventories mean the goods of the company which the company has not yet sold and
• Short term loans and advances mean payments made in advance by the company for a service or product.

What is Non-Current Assets

On the other hand, non-current assets or fixed assets are those assets which will be used by the company for more than one year.

Examples of non-current assets are lands and buildings of a company, furniture and fixtures, vehicles, machinery and equipment, long term investments etc.

Generally every company divides their assets into these two categories but friends, sometimes companies also divide assets on the basis of physical existence and there are two types of assets on this basis such as Tangible Assets and Intangible Assets.

What are Tangible Assets

Tangible assets are those assets which have physical existence or which we can see. Examples of tangible assets are company land, buildings, machinery, equipment, cash, office supplies, inventories etc. We can see all these assets physically and because of this, these are called Tangible assets.

What are Intangible Assets

Intangible assets are those assets which have no physical existence or which we can not see. Examples of intangible assets are company’s patents, brands, copyright, trademark, trade secrets, special rights etc. These are assets that are valuable to companies but we cannot see them and because of this, they are called intangible assets.

Generally manufacturing companies have more tangible assets because they have larger factories and machinery, on the other hand, service based companies have more tangible assets because these companies do not manufacture anything.

What are Liabilities

We often hear the term liability, so friends, in this post you will know about what is liability and its types.

Liability to a company means all the money that the company has borrowed or Debt and every company is legally compelled to refund their liabilities.

There are two types of liability of any company such as Current or Short term liability and Non-current or Long term liability.

What is Current Liability

Current Liabilities are those liabilities which we have to pay in a year. Examples of current liabilities are given below.

• Accounts Payable i.e. from whom the company has taken the goods of the loan product, the money that is due to be paid to them.
• Short term debts i.e. those loans which the company has to pay in a year.
• Provision i.e. those liabilities whose amount is not yet fixed but those have to be paid within one year such as income tax.

What is Non-current liability

Non-current liabilities are those liabilities which don’t have to pay within a year.

Examples of non-current liabilities are given below,

• Long term loans means loans taken from banks for a long time.
• Bonds i.e long term loans taken from public.
• Pension liabilities i.e. the money that the company gives to their retired persons.

Friends, in general, every company has a little liability, but if the liability increases too much, then the company can come into a lot of problems. So friends, before investing in any company then it must be seen whether the company’s liability is growing very fast.

Friends, I hope this article about what are assets and liabilities will clear all your doubts. I am advising you that you should never invest in the market before knowing the complete information as well as other information of a company.

Originally published at https://www.planrobotic.com on July 26, 2021.