What is the difference between assets and liabilities on a balance sheet?

What is the difference between assets and liabilities on a balance sheet?

• A. Assets are obligations owed to others.
• B. Assets are resources owned; liabilities are obligations owed to others.
• C. Assets are revenues; liabilities are expenses.
• D. Assets are owner withdrawals from the business.

Answer: (B)

On a balance sheet, assets are resources owned by the business that have future economic benefit, such as cash, inventory, and equipment. Liabilities are obligations the business owes to others, like accounts payable or loans. The difference lies in ownership versus duties: assets are what the company owns, while liabilities are what the company owes. The statement that assets are resources owned and liabilities are obligations owed to others captures this distinction. The other choices mix up terms from different financial statements or describe activities (like revenues, expenses, or owner withdrawals) that don’t define assets or liabilities.

On a balance sheet, assets are resources owned by the business that have future economic benefit, such as cash, inventory, and equipment. Liabilities are obligations the business owes to others, like accounts payable or loans. The difference lies in ownership versus duties: assets are what the company owns, while liabilities are what the company owes. The statement that assets are resources owned and liabilities are obligations owed to others captures this distinction. The other choices mix up terms from different financial statements or describe activities (like revenues, expenses, or owner withdrawals) that don’t define assets or liabilities.