What is passive?

Alexander Smaznev
Alexander Smaznev
February 19, 2015
What is passive?

A liability is a term for accounting, one of the parts of an enterprise’s balance sheet. The liability is located on the right side of the balance and is opposite to the asset.

The asset contains information about all the resources of the enterprise that can be used for profit (real estate, equipment, transport, cash, shares, intangible assets). And in the liabilities side sheet the sources of these assets are listed.

On what is a balance sheet and assets, see the articles:

Liabilities structure

What is passive? Due to what are the assets of the company? There are three such sources:

  1. Share capital.
  2. Profit from production and investment activities.
  3. Accounts payable.

Liabilities represent the obligations of the company to a variety of individuals and organizations, which in the future to be calculated. Such persons and organizations include: founders, investors, creditors (banks), suppliers, utilities, enterprise personnel, tax authorities, a pension fund, etc.

The liabilities list all directions to which assets can flow.

Balance between liabilities and assets

The liability of the company must always be equal to the asset. If, for example, an organization purchases equipment for 150 thousand rubles, its tangible assets will increase by that amount. But there will be a similar debt to the supplier (liability). After the full settlement is made, the liability is eliminated. But accordingly, the amount on the current account will decrease (the asset will decrease).

If the liabilities are not equal to the assets, then the balance is not properly reduced. And this is not a balance, but an imbalance.

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