Asset vs Liability

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Let's define these two first in its simplified form:

Asset - anything that creates or gains income.

Liability - anything that deducts income.

Everything can be an asset or a liability. It just depends on how you perceive and use these things.

Some examples:


Car
Asset - It's an asset if you use it for going to work, taking your kids to school so that they don't need to have additional transportation fees in their allowance.


Liability - if you just use it to impress other people, better sell it. Also, if you're going to use to travel aimlessly around town, better sell it.

Cellphone


Asset - It's an asset if you're going to call business related people or clients.
Liability - If you're just going to use it for playing Candy Crush, I suggest you sell it. :P

House
Asset - if you're going to let someone else rent it, it would be an asset. Or use it for real estate investment and then sell at a high price.


Liability -It's a liability if you're going to stay in it. Not that staying in one is a complete liability but it's more of a liability than an asset. You have to pay electricity bills, water bills, maintenance bills, bill bills, etc.



About the author

ljourn-llagas

Hi! I am Ljourn Llagas, 25 years old, a programmer and online earner since I was a college.

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