Albert Opoku

Life Lessons: 50 – Know the difference between assets and liabilities

Life Lessons: 50 – Know the difference between assets and liabilities

In both high school and the university I studied accounting. I actually majored in accounting at the University, so the words asset and liabilities and their business definitions have been no strangers to me. I am very sure I am not the first person from whom you have heard these two words.

In pure accounting terms, an asset is defined ‘’as a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise’’ and a liability is defined as a ‘’current obligation of an entity arising from past transactions or events’’

But why should you bother to know the difference between an asset and a liability, well because I later realised that those definitions are fine for the dictionary and the balance sheet, but for ‘normal’ everyday life these are not the definitions to live by.

The definition that makes more sense to the life I am living is this one from Robert Kiyosaki’s ‘Rich Dad and Poor Dad’ an asset is ‘what brings money into your pocket and a liability is what takes money from your pocket. Simple! And that’s the definition you need. Why? Okay let me give you an example.

If you have a car, the Accounting and dictionary definitions will tell that you have an asset but if you go by Robert’s definition well it depends on whether its bring in money into your pocket or takes it out of your pocket. So if your car was a taxi working for you what is it? Or if it was you private car for which you buy gas for each day, what is it?

So my good friend, the next time you buy anything ask yourself ”Am I buying an asset or a liability?”. My advice: spend your time buying assets and not liabilities or you will find yourself driving your car in the rat race.
I will be happy to read your comment, post it below.

Share your view on this lesson using the comment section below



15 Responses

  1. Another great post Albert!
    Simple, too the point and very true!
    I really love what you are doing and the vaule you are sharing with all regaring financial intelligence!

  2. Thanks Lavinai, what can I say? I keep learning from leaders in the field like you, your inspiration is what keeps me going. Thanks for your support

  3. Hi Yaw, I am new to your block but find your short article very inspirational and straight to the point. Coincidentally today is my birthday and therefore the appropriate time to take stock of my life and one of the areas I’ve been thinking of carefully is to invest my time in doing things as well as well as hanging around friends who will be able to contribute positively into my life i.e assets and get rid of the things and friends who are more of a liability. Well done and keep the good work.

    1. Hi martin, I am happy you have found something useful on my blog. I like you idea of taking stock of your life, we all have to take time off to reflect on how far we have come and what we want to achieve with the rest of our lives. I wish you all the best in this endeavour….and of course you need those friends that will help you achieve your goal in life.

  4. Hello Albert, I just stumbled into your blog out of curiosity. It was one of the links on Nana Damoah’s blog page, and this was the first post I sampled. I like what I have seen and will take the time to look at a few more. Most likely you’ve found a ‘follower,’ ha ha! Have a good day and keep up the good work.

    1. Dear Isaac, thanks for you words, I am happy you found my writing useful, I look forward to catching up with you one of these days

  5. Hello Albert your words are more than just words. Your message only did not made an interesting reading but also inspired me to continue with a life investment..im 20years of age and i was looking on google to find how to calculate for the price of epack when i saw your page….Keep it up God bless you

    1. Hi Etsuah
      I am happy to know I have been of some help to you, I recommend you read the book, the Riches man in Babylon…In as much a money in itself does not guarantee happiness, a plan to achieve financial independence gives peace of mind and makes live worth living

  6. Hi Albert,

    I came across your excellent essay while image shopping for an illustration for an upcoming post, inspired by Mr. Kiyosaki’s definition of assets and liabilities, adapting the principle to life aboard a sailing vessel.

    I was wondering if I might use your ‘Simple, right?’ image on my post, with credit and link to yours?

    Thanks for your consideration,

    Dave Zeiger

      1. Hi Albert,

        It seems my ‘thank you’ may have not arrived? So, many years belated, but THANK YOU!

        Dave Z

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