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Basic Accounting Terms 2.3
(ii) Current Assets. Assets that are held by the entity or enterprise for resale or conversion into
cash in a short time.
Current Assets are assets held for short-term with a purpose to sell or convert them
into cash. Examples of current assets are unsold goods (Closing Stock or Inventory),
debtors, bills receivable, bank balance, etc.
(iii) Liquid Assets. Current Assets that can be realised, i.e., converted into cash in a short period.
Liquid Assets are part of the current assets that can be realised (converted) into cash in
a short period. Examples are cash in hand, bank balance, fixed deposits, etc.
(iv) Wasting Assets. Assets which have limited life and decrease in value by extraction.
The term ‘Wasting Assets’ is associated with natural resources such as coal, oil, etc.
Wasting Assets are assets having limited life and decrease in value over time with
consumption. These assets cannot be recycled for generating additional revenue.
(v) Fictitious Assets. An asset coming into existence by an accounting entry.
Fictitious Assets are either accumulated losses or Deferred Revenue Expenses
(e.g., Advertisement Suspense) not yet written off till the date of Balance Sheet.
9. Liabilities. Claims of amounts against the entity or enterprise.
Liabilities mean the amount which the enterprise owes. It may be towards the outsiders or
the proprietors.

Liabilities can be categorised into:
(i) Internal Liabilities. Liability towards owners or proprietors.
It is a claim of the owners or proprietors against the assets of the enterprise termed as
Capital and shown as liability of the enterprise.
(ii) External Liabilities. Liabilities towards outsiders.
External Liabilities are those liabilities which arise from the credit transactions or loans
taken. For example, creditors, bank overdraft, bills payable, outstanding liabilities, etc.
External liabilities can be further classified into the following:
(a) Long-Term or Non-Current Liabilities. These are liabilities which are payable
after a period of 12 months from the end of the financial year. For example,
long-term loans, debentures, Public deposits, etc.
(b) Current Liabilities. These are liabilities which are payable within a period of
12 months from the end of the financial year. For example, creditors, bank
overdrafts, bills payable, short-term loans, etc.

(iii) Contingent Liabilities. A liability that crystallises upon happening of an event.
Contingent Liabilities are those liabilities of the enterprise in which obligation to pay
arises on happening of a future event. Thus, contingent liability may or may not be
payable. An example of contingent liability is a legal case against the enterprise for
compensation. If the court ruling is against the enterprise, it becomes payable and if
the court ruling is in favour of the enterprise, it is not payable.