Difference Between Active and Passive

The difference between assets and liabilities is based on the nature they have at the economic level. While an asset will generate in our finances a property or a collection right , a liability will produce a payment obligation .

In other words, the main difference between an asset and a liability is that the former will be capable of generating income and the latter would only cause an expense .

Characteristics of assets and liabilities

Having mentioned the main difference and, in turn, the characteristic that defines them, there are also other differences to take into account:

Possibility of generating incomepayment obligation
Amortization detracts from valueAmortization subtracts outstanding debt
can represent an investmentOne of its missions is to finance assets
Its value can change over timeHas a set value along with an expiration date

As we can see, although we may think a priori that having a liability does not lead to any benefit, nothing is further from the truth.

We can affirm that a liability can give us the opportunity to obtain an asset that, if it were exclusively through pure savings and without any type of indebtedness, would take much longer to obtain.

Examples of assets and liabilities

In order to see in a more practical way what an asset and a liability consist of in our day-to-day life, here are some examples of each one along with their function:

  • Laptop: It is an asset that we own. We can take advantage of it by using it for work or leisure. You can get money by selling it. Therefore it is an asset.
  • Housing: Again it is good that we have property. We can earn an income by selling or renting it. It is an asset.
  • Actions : It is a good that can generate returns. That is, it can produce collection rights called dividends . It is an asset.
  • Mortgage loan : It is a payment obligation. It allows us to get a home without having saved the total purchase value. It is a passive.
  • Personal loan : In this case it is also a payment obligation. It allows us again to obtain a good or service that we are not able to obtain partially or totally. Examples are car purchases, travel, etc.
  • Issuance of debt : It is about asking the market for borrowed money in exchange for periodic payment obligations by the company that issues it. It is a passive.

Although there are more examples that we could explain, these are the most common and the ones that will arise in our daily lives.