We all deal with assets and liabilities in our personal lives. Please define and
ID: 2818009 • Letter: W
Question
We all deal with assets and liabilities in our personal lives. Please define and discuss with the class: . asset liability Next, give an example using your personal life, of an asset and a liability. Now, you should have a better understanding of the "use of your money": Discuss the following with the class Decisions are made with our personal finances to obtain the items we need to take care of ourselves and our families. What options do you have to decide where your resources should be spent or do you have options in your personal life? Support your response with specific details.Explanation / Answer
Yes, it’s true that we all deal with assets and liabilities in our personal life.
So first of all let’s part these and understand:-
If we see some theoretical definition:-
Assets are items that have monetary value and are owned by a business. Assets are either tangible or intangible.
Tangible assets are those assets that have a physical form. They can be seen and touched. A building is a tangible asset.
As per Accounting point of view we also need to do many treatments for assets, Such as:-
Depreciation: - For tangible assets
Amortization: - For Intangible assets
Basically there are two type of assets:-
I) Fixed Assets (Used for long term, say more than 1 years)
II) Current Assets (Used for short term, say less than 1 years)
Yes, it’s true that we all deal with assets and liabilities in our personal life.
So first of all let’s part these and understand:-
If we see some theoretical definition:-
Assets are items that have monetary value and are owned by a business. Assets are either tangible or intangible.
Tangible assets are those assets that have a physical form. They can be seen and touched. A building is a tangible asset.
As per Accounting point of view we also need to do many treatments for assets, Such as:-
Depreciation: - For tangible assets
Amortization: - For Intangible assets
Basically there are two type of assets:-
I) Fixed Assets (Used for long term, say more than 1 years)
Example could be cupboard ( whitch we generally use for more than one year)
II) Current Assets (Used for short term, say less than 1 years)
Example could be Calculator ( Which we generally use for less than one year).
2) Liability: In general understanding we can say that anything witch we owe, is called liability.
Say For example: - A loan taken from a bank (As we all know many of us take loan from various sources in our routine life) that will be termed as liability for us, as we owe to some outsider party.
If we see some theoretical definition:-
Liabilities are financial obligations a business owes to other persons, businesses and governments.
If we see in our personal life, we are liable to pay tax to the Government that will come under our liability as we are liable to pay tax as per the government provision.
So like Assets liabilities are also of two type:-
I) long term liability (The liability witch is for longer term, say more than one year)
Example could be Home laon ( which we generally take for more than one year)
II) Short term liability (The liability witch is for shorter term, say less than one year)
Example could be Tax payment (which we need to pay in less than one year)
Now let’s come to Use of your Money: -
In our personal life we should also know that, how should we utilize our money (Means we should know what is the optimum use we can do with our money).
Because we have limited resources, and from those resources we have to manage our assets and liability balance.
Decision making thing, we can understand it better with example,
Say, if we require some vehicle to commute from school to home and home to school, here we have
Multiple option (like Scooter, Bike, Car etc…). So now, here we have to take proper decision to use our money. As if we are comfortable to use Scooter to commute then we should not buy the Car for only this purpose. (As the Scooter will be much cost effective then the Car.). And this case we should also see for family’s financial position, what our family can afford.
So in the above case it self we can understand Assets and liability also:- As an when we buy the Scooter that will become our assets (as we will be owing that Scooter), but at the same time if we have taken some auto loan to pay the scooter price, in that case that auto loan will become our liability.
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