Question

Discuss some of the major differences between Liabilities and Owners' Equity

Answer 1

1. Liabilities are the rights of Outsiders while Owner Equity is the rights of the shareholders of the company.

2.Creditors or Account Payables are not the owners of the company so they can not control the operations of the business. They can claim only the amount of credit. However, the company can grant some control under the credit terms and conditions. While shareholders are the owners of the business and they can control the operations of the business through Board of Directors.

3.Debt that categorized as Long-Term Liabilitiesare matured at the specific period of time but Owner Equity can not be matured.

4.The Outsiders have legal priority to claim their rights over the assets of the business in case of liquidation of the business. First Business must pay the full amounts of due to outsiders, then the firm can pay to the shareholders.

Hope its clear

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