What is a liability?

 WHAT IS A LIABILITY?

Liabilities are things that are owed by the business which are the obligations or debts of the business. These could be classed as:

·         Non-Current liabilities

·         Current liabilities

 

Non-Current liabilities are obligations that are owed by the business over a long period of time usually for longer than one year and these are also called long-term liabilities Examples include:

·         Long-term loans

·         Long-term credit facility arrangements

·         Long-term bond payable arrangements

 

Current liabilities are things that are owed by the business over a short period of time usually for shorter than one year and these are also called short-term liabilities. Examples include:

·         Creditors

·         Short-term debts

·         Accrued expenses

 

Your task:

Identify 3 differences between current and non-current liabilities

What is an Asset?

 WHAT IS AN ASSET?

Assets are things that are owned by the business which are used to produce economic value to the business in meeting its debts and other commitments. These could be classed as:

·         Non-Current assets

·         Current assets

 

Non-Current assets are things that are owned by the business over a long period of time usually for longer than one year and these assets cannot be converted to cash so easily. Examples include:

·         Motor vehicles

·         Property

·         Furniture

 

Current assets are things that are owned by the business over a short period of time usually for shorter than one year and these assets are more liquid than non-current assets and are cash or can be easily converted into cash. Examples include:

·         Bank

·         Debtors

·         Stock

 

Your task:

Identify 3 differences between current and non-current assets