Distinction Between Assets And Liabilities - SS1 Accounting Past Questions and Answers - page 1
What are assets on a balance sheet?
Things that a company owns or controls
Financial obligations that a company owes to others
Debts that must be paid back in the future
Resources that a company can use to generate income
What are liabilities on a balance sheet?
Things that a company owns or controls
Financial obligations that a company owes to others
Debts that must be paid back in the future
Resources that a company can use to generate income
Which of the following is an example of an asset on a balance sheet?
A loan that a company owes to a bank
Rent that a company owes to its landlord
Inventory that a company has in stock
Salaries that a company owes to its employees
Which of the following is an example of a liability on a balance sheet?
Equipment that a company owns
Cash that a company has in the bank
Taxes that a company owes to the government
Investments that a company has made
What is the difference between assets and liabilities on a balance sheet?
Assets represent what a company owes, while liabilities represent what a company owns
Assets and liabilities are the same things
Assets represent what a company has, while liabilities represent what a company owes
Liabilities represent what a company has, while assets represent what a company owes
Why is it important for a company to have more assets than liabilities?
It is important for a company to have more assets than liabilities because this indicates that the company is financially stable and able to meet its obligations. If a company has more liabilities than assets, it may struggle to pay its debts and may ultimately go bankrupt.
Give an example of a short-term liability and a long-term liability.
A short-term liability might be an account payable that is due within 30 days, while a long-term liability might be a mortgage that is due over the course of 30 years.