can there be assets without liabilities? Experts please answer the question.
5 Replies
Dhruvi N suthar
(Account Executive)
(303 Points)
Replied 24 December 2013
Can you please be more clear about your question??
alhad
(article clerk)
(202 Points)
Replied 24 December 2013
We have been asked the question by our college in this manner only.This is one of the questions asked in our assignment & we are confused about the answer.Our one view is,
You can have assets and no liabilities in which case assets equals owners equity. For instance if the company had cash, from operating the business, or and IPO, and bought an asset for cash there would be no liability incurred.
Other view is,
Because the only way you can obtain an asset is by offsetting it with a liability. When you buy a car you obtain an asset, but you offset it by having a liability, which may be a cash payment or a loan taken out... It all makes perfect sense.
Vardan Singh Sengar
(Accounts Manager in Private Company)
(433 Points)
Replied 24 December 2013
i think Cash is the Asset without Liability
Jithin
(Learner)
(1057 Points)
Replied 24 December 2013
Hmm..its theoretically possible definitely since u can fund assets using owners equity & retained earnings..Of course balance sheet of a newly incorporated company with 100% equity wud show no liabilities..but as u kick start the business, I dont think u can avoid liabilties entirely. Even if its a 100% equity firm, still I guess u will incur current liabilities. For example u may purchase raw materials on credit..now that leads to an asset in the form of stock & liability in the form of trade creditors.
There are many companies which dont hv any long-term debts(but even these companies hv sme current liabilities). I will give u sme links of such companies' balance sheets. Hv a look..
https://finance.yahoo.com/q/bs?s=FAST+Balance+Sheet&annual
https://finance.yahoo.com/q/bs?s=lsi
https://finance.yahoo.com/q/bs?s=MA+Balance+Sheet&annual
https://finance.yahoo.com/q/bs?s=CTXS+Balance+Sheet&annual
https://in.finance.yahoo.com/q/bs?s=CTSH&annual
https://finance.yahoo.com/q/bs?s=aapl+Balance+Sheet&annual
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