The difference between assets and liabilities is called:
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The difference between assets and liabilities is called equity. Equity represents the residual interest in the assets of an entity after deducting liabilities. In other words, equity is the value that belongs to the owners of a business, and it is calculated as the difference between the value of the assets and the value of the liabilities.
Assets are resources that a business owns or controls, and which have the potential to generate future economic benefits. Examples of assets include cash, accounts receivable, inventory, property, plant, and equipment.
Liabilities, on the other hand, are obligations that a business owes to external parties, and which require the entity to transfer assets, provide services, or settle other obligations in the future. Examples of liabilities include accounts payable, loans payable, and accrued expenses.
Equity can be classified into two categories: owner's equity and shareholder's equity. Owner's equity is the value of the assets after deducting liabilities, which belongs to the sole proprietor of a business. Shareholder's equity is the value of the assets after deducting liabilities, which belongs to the shareholders of a corporation.
In summary, the difference between assets and liabilities is called equity, which represents the value that belongs to the owners of a business. Equity can be classified into owner's equity and shareholder's equity, depending on the legal structure of the business.