This a question that has been puzzling to me, where should a car be categorized and why should it be placed there. Should a car be called an Asset or should a car be called a liability? So with this puzzling question in my mind, it got me thinking for a while until I finally came up with of idea of writing an article asking my
Hive readers or audience to help me out by answering the question is a car an asset or a liability? Please note that your answers should come with convincing points and this post is mainly for engagement purpose.
I went on a do a little research in finding out what an asset is and what a liability is? Through digital.business, I was made to understand that an asset is anything that has economic benefit to you, that it is it puts money in your pocket, while a liability is something that causes you to spend (expenses), that is it takes money out of your pocket. But this is where the confusion comes in for me, if you say an asset puts in money in your pocket and a liability takes out money from your pocket, while still call a car a liability when it can be used for commercial purposes to bring in money, like becoming an Uber driver where you can earn money from your trips, venture into the delivery business where you can get paid for taking goods from one place to another or even sign up for the road travelling business where you can transport passengers from one state to another.
All these and more are ways in which a car can be used for commercial purposes, yet it is still referred to as a liability. Oh it just popped into my mind, one could say a car is grouped under the category of liabilities because it is an item that requires the owner to spend on it through maintenance fee at the mechanic’s shop, buying petrol when its tank is empty, changing the color when the initial color has faded, spraying the car when it has a crash or dent and other expenses a car could bring for its owner. But here is the thing, if the car is bringing in more money for the owner than the money it takes from the owner, do we still refer to it as a liability? Through my findings, I came to discover that assets have the ability to add value to a company and at the same time increase a company’s equity while a liability has the ability to decrease a company’s value and equity.
But I have a puzzling question from this expression, if a bus travelling company has a total of 100 buses that the company makes use of in transporting their passengers from one place to another at a certain cost, can one stay refer to this buses as liabilities? Because from my understanding these buses are what add value to the bus travelling company’s equity by generating profitable revenue for the company through the money it makes from the cost of the trip. So why still call those buses liabilities?
In conclusion....
I still stand to be corrected and made to understand the utmost reason why a car should be considered a liability and not an asset. So I would appreciate your comment addressing this topic. Let’s learn from each other’s thoughts and understanding.