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Explain the Difference Between the Way Real Assets Are Created

question 108

Essay

Explain the difference between the way real assets are created and the way financial assets are created.


Definitions:

Drawing Account

An account that tracks amounts withdrawn from a business by its owners for personal use, which reduces the owner's equity.

Capital Account

An account on a nation's balance of payments that records all transactions related to asset changes, including investments and loans.

Liabilities

Financial obligations or debts owed by a business to outsiders, which are required to be settled in the future.

Drawing

A withdrawal made by an owner from the business for personal use.

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