Write short note on Liabilities and Subsidies.
Liability: is an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Money deposited with a bank becomes a liability of the bank, because the bank has an obligation to pay the depositor the money deposited usually on demand. The money deposited is an asset for the depositor. A debit increases an asset and a credit decreases an asset. A debit decreases a liability and credit increases a liability.
Liabilities reported on a balance sheet are usually divided into two categories:
Current liabilities: They usually include payable’s such as wages, accounts, taxes and accounts payable, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations.
Long-term liabilities: They usually include issued long-term bonds, notes payable’s, long-term leases, pension obligations, and long-term product warranties.
Subsidies: are a form of financial or in kind support extended to an institution, business, or individual, generally with the aim of promoting economic and social policy. They are commonly extended from Government, but they can related to any type of support, for example, from NGOs or implicit subsidies.
Subsidies come in various forms including:
Direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebates). Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical.
The most common forms of subsidies are those to the producer or the consumer. Producer/Production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production.Consumer/ Consumption subsidies commonly reduce the price of goods and services to the consumer.
Whether subsidies are positive or negative is typically a normative judgement. As a form of economic intervention, subsidies are inherently contrary to the market’s demands.
Thus, they are commonly used by governments to promote general welfare. The Indian government has subsidized many industries and products, from petrol to food. Loss-making state-owned enterprises are assisted by.the government and farmers are given access to free electricity.