Provide an example of an asset and a liability from your everyday life. Explain what makes one an asset and the other a liability. How does each affect your equity? Now imagine that you own your own business. How might your transactions impact your company’s assets, liabilities, and owner’s equity? Why do you think it is important to analyze personal and business transactions?
examples of assets : car, inventory, land and building, furniture, machinery, debtors etc
examples of liabilities : bank loan, Overdraft, creditors etc.
building will give value to the company and it will increases the wealth of the company.
loan is the obligation to pay the amount and it is responsibility to pay the amount with interest and it reduces the wealth of the company
when asset increases owners wquity will also increase and when the liabilities increases owners equity will decreases
its very important to analyze personal and business transactions because to know the actual profit and running status of the busiiness. when business and personal trasactions come together then we cannot possible to verify the actal profit
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