Active and passive - two basic concepts of accounting

Accounting is a kind of information system, the main task of which is to display information about the economic activities of the enterprise with the purpose of further analysis and making managerial decisions. Active and passive are the basic concepts of accounting. In this article, we will describe what these terms mean and why they are so important.

As you know, one of the main accounting documents of the enterprise is the balance sheet, in which there are sections "asset" and "liability". In the "asset" section, all the assets owned by the company are displayed - fixed assets, capital goods, low-value items, cash on accounts and at the cash desk, accounts receivable and so on. All assets are the property of the enterprise and are recorded in the balance sheet after they pass the valuation procedure, which differs for each type of property.

Obviously, no property can be acquired free of charge, without using any means. That is why the "passive" section includes all sources of the formation of the company's assets. These sources can be divided into two large groups: the capital of the enterprise (amounts of money and the value of the property provided by the founders as initial deposits) and its liabilities - accounts payable, receivables from suppliers, authorities and employees.

Now let's try to understand why the main document is called "balance"? Why is balance of assets and liabilities so important? To understand this will help, oddly enough, the physical law of conservation of matter, the main essence of which can be conveyed by the phrase "nothing appears from nowhere and disappears into nowhere". With regard to accounting, the acquisition of any property in the asset must entail a corresponding change in liabilities. Say, the receipt of a firm's money as a loan, on the one hand, will appear in the asset's article "cash on the account", but also in the liability item "accounts payable". If, then, other assets are acquired for this money, for example, shares, then there will be a transfusion between the articles "money in the account" and "financial investments", but the asset and the balance liability will still be equivalent. It is this equivalence that shows that all the reporting is properly drawn up and there are no errors in mapping the company's business.

Thus, the asset and liability are, in fact, two sides of the same coin, only the asset shows the side that concerns only the acquisition and possession of the property, and the passive is the one that is related to the source through which the firm receives the new property. Observance of the equality of assets and liabilities is an important task for any accountant, since the discrepancy between the two sections of the balance sheet shows that it is drawn up with an error. Finding a mistake in the balance sheet is quite simple - just find the difference between the asset and the liability, and divide this amount into two. The resulting figure will be the sum of the error, mistakenly entered in the wrong section. True, this method is effective only if there is only one mistake - otherwise the search for inconsistencies can last for a long time, and, probably, the preparation of the document will have to start again.

We hope that they brought to the readers exhaustive information about what assets and liabilities are. Remember, the equality of the two sections of the balance sheet is the main principle of accounting and the main sign of proper record keeping in the enterprise. We wish you that the asset and liability in your balance sheets always converge a penny into a penny !!!