Understand the difference between assets, liabilities and equity It is essential for anyone interested in the financial and accounting field. ⁢These concepts are basic pillars that allow us to understand the⁢ economic situation of a ⁤company or even an individual. Next, we will explain to you in a clear and concise way what each of these terms represents and how they relate to each other.

Asset: resources that generate profits

El asset refers to all those goods and rights that a company or person owns and that has the ability to generate economic benefits in the future. These resources can be tangible, such as a building or machinery, or intangible, such as a patent or trademark. The asset is divided into two main categories:

• Current asset: are those resources that are expected to be converted into money within a period of less than one year, such as cash, accounts receivable and inventory.
• Non-current asset: ⁤are the resources that will be used long term, such as⁤ real estate, vehicles and ⁢equipment.

Passive: obligations and debts

El passive represents the obligations and debts that a company or person has with third parties. These commitments can arise for various reasons, such as the acquisition of goods or services on credit, the obtaining of bank loans or the issuance of bonds. Like assets, liabilities are classified into two categories:

• Current liabilities: are debts that must be paid within a period of less than one year, such as accounts payable to suppliers, taxes payable and the current portion of long-term loans.
• Passive ⁢non-current: are ⁤obligations that must be settled within a period of more than one⁢ year, such as long-term loans and issued bonds.

Equity: the difference between assets and liabilities

He . is defined as the difference between active and passive of a company or person. In​ other words, it represents the resources that really belong to the owner or shareholders, once all liabilities have been discounted. The heritage is made up of:

• Capital: it is the initial contribution made by the owners or shareholders to finance the company.
• Booking: they are the undistributed profits that are ⁢kept ⁣in the company to ‌face future‌ contingencies or ⁢investments.
• Acumulated results: are the profits or losses obtained by the company over time and that have not been distributed.

The basic accounting equation

The relationship between assets, liabilities and equity is summarized in the basic accounting equation:

This equation tells us that the total value of the resources of a company (asset) is equal to the sum of its obligations (liabilities) and equity of the owners. Any change in one of these elements will directly affect the others, always maintaining accounting balance.

Knowing and mastering these concepts is essential to correctly interpret the financial statementsof a company, such as the balance sheet and the income statement.‌ In addition, it allows us to make informed decisions about investments, financing⁢ and resource management, both at a business and personal level.

Ultimately, understanding the difference between assets, liabilities and equity is the basis for entering the fascinating field of finance and accounting. With this knowledge, you will be better prepared to analyze the financial health of a company or plan your own finances efficiently and effectively.

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