ABSTRACT
The term asset, commonly used in financial statements, means things of value possessed by a company. Liabilities represent the financial claims on those assets. For example, if a company wants to purchase a new building, it must first figure out how it is going to pay for such an asset. This usually comes from some sort of debt financing, or through the sale of stock to shareholders. The asset (what the company owns) is directly linked to the company's liabilities (where the money for the asset came from). This relationship is the main focus of the balance sheet (see tip #304).
