Difference Between Debt & Liabilities

[Nutria]

This (http://classroom.synonym.com/differe...ies-15567.html) is an interesting article on the difference between debt, liabilities and "plain old expenses".

[TexasHusker]

I count my over-hanging gut as a liability too.

[jessiccain]

A liability is when you borrowed money or any amount owed to another. This may includes regular long term & short term bills, for instance amount due for electricity bill that has been received, but not yet paid.

A debt is a specific type of liability that includes borrowed money such as a loan, mortgage.

[JulianMark]

Are assets of my business also considered as liabilities?

[disneysteve]

Are assets of my business also considered as liabilities?

Do you own those assets outright?

If you have a piece of equipment that is worth $10,000 but you owe $8,000 on the loan you took out to purchase it, then yes, it is both an asset and a liability.

[GoodSteward]

Technically, pretty much everything falls under liabilities in our country. Every dollar is borrowed, so we are bartering using borrowed money. If that ever got called in, we would loose everything we have. We are always at the mercy of a higher institution.

One thing we call an asset but is really a liability is a house(and land), paid for or not. You will NEVER stop owing taxes, and if you stop paying they get the property.

Another is a car, paid for or not. You have to keep insurance and tags on it. If you don't you get tickets (fees), and could eventually lose your license and even see jail time.

Sounds like a debt to me.

[disneysteve]

One thing we call an asset but is really a liability is a house(and land), paid for or not. You will NEVER stop owing taxes, and if you stop paying they get the property.

Another is a car, paid for or not. You have to keep insurance and tags on it. If you don't you get tickets (fees), and could eventually lose your license and even see jail time.

Sounds like a debt to me.

You are confusing liability with expense. Those are not the same thing at all.

Just because there is a cost to maintain something doesn't make it a debt if you own it outright.

[GoodSteward]

You are confusing liability with expense. Those are not the same thing at all.

Just because there is a cost to maintain something doesn't make it a debt if you own it outright.

But do you own it? If someone has the power to take it from you, they still have rights to it. Which means you don't own it fully, or at least not entirely on your own.

I know it may not be considered this way but based on real world application I personally say it is. Taxes are not something you can choose to pay, therefore not just an expense. It qualifies more as a debt. You must pay them continually, or in this case, loose the item being taxed. If they can take possession of your house for not paying 100$ in taxes, and the house is worth 100,000$, that doesn't sound like just an expense to me. Homeowners insurance is an expense because they can't take the house if you don't pay. Taxes are unique. They are labeled expenses but have rights as debt lenders.

With Auto, you can technically not pay tags or insurance, but you run a high risk if you use it on the road. They won't take the car, however, just for not paying those. The house isn't like that. Even if you don't live there, you have to keep paying or they will take it. You don't have any control over that.

[disneysteve]

But do you own it? If someone has the power to take it from you, they still have rights to it. Which means you don't own it fully, or at least not entirely on your own.

Someone can sue you for something and you can be forced to sell belongings to satisfy the settlement if you lose the case. Does that mean you don't really own anything?

Sorry, it just doesn't work that way.

[Fishindude77]

The old "You never really own your land" debate has been going round and round since the time property taxes were initiated.

I do understand that train of thought but paid for land is still considered an asset with every bank and accountant I am familiar with.

[GoodSteward]

The old "You never really own your land" debate has been going round and round since the time property taxes were initiated.

I do understand that train of thought but paid for land is still considered an asset with every bank and accountant I am familiar with.

Right, and I understand the concept of it. I just don't agree as far as principle goes since the government has the last say, not us. Even in the lawsuit DisneySteve mentioned, the court has the authority to tell you what to do with what you own, thus removing the rights of ownership. Eh, didn't mean to shift the thread to this. I was just stating how I feel about it, even though by financial definition I know I'm "wrong"

[disneysteve]

thus removing the rights of ownership.

Very few (if any) rights are absolute. Rights come with responsibilities. Fail to maintain your responsibilities and you may lose those rights.

[GoodSteward]

Very few (if any) rights are absolute. Rights come with responsibilities. Fail to maintain your responsibilities and you may lose those rights.

just like debt.

[disneysteve]

just like debt.

Not sure what you mean by that but whatever....

[GoodSteward]

Not sure what you mean by that but whatever....

Debt has responsibilities. If you don't maintain them people won't lend to you. And you also could lose the item due to nonpayment. That's all I meant.