Active-passive Increase

Meaning of Active-passive Increase

The increase in assets and liabilities is part of the balance sheet , which plays an important role alongside the asset swap , the passive swap and the active-passive decrease .

What is the active-passive increase?

In order to understand what the increase in assets and liabilities really is, it must be clarified how a balance sheet is structured. This balance consists of an active side and a passive side.

The assets side includes fixed and current assets and the liabilities side includes equity and liabilities, which are also known as debt capital . These are influenced differently depending on use, for example by a purchase and the corresponding payment method .

Overview of the balance sheet in the form of a table

Active side Passive side
Capital assets Equity
Current assets Liabilities (outside capital)

In the active-passive Mehrung is special, that the total assets equally raised to the active and passive side. The easiest way to understand this is with an example. Let us assume that a new desk is bought for the office, if this is then paid for with a loan, then the liability side increases here as well, since it becomes a liability.

Effects of the increase in assets and liabilities on the balance sheet

According to WHOLEVEHICLES.COM, the increase in assets and liabilities is always the same on the balance sheet, which means that it always increases equally on the active side as well as on the passive side. However, this also means that the balance sheet total must always be the same on both sides, otherwise the balance sheet equation is not optimal. It is important to note that the balance sheet total always increases with the increase in assets and liabilities. Should this decrease, then it is an active-passive decrease.

Difference between the active-passive increase and the active-passive decrease

Similar to the increase in assets and liabilities, both sides of the balance sheet are influenced by the decrease in assets and liabilities, called the active side of the balance sheet and the passive side. But the difference here is that the balance sheet total does not increase, but rather decreases. A typical example of an asset / liability reduction is the repayment of a loan. Suppose a company takes out a loan of 50,000 euros . Here, the liabilities are addressed on the passive side and paid at the same time with the payment from a company account, so that the value is reduced on the active side.

Example: Purchase of office supplies worth 20,000 euros

Active side Passive side
Fixed assets:
Land = EUR 40,000
Rent = EUR 10,000 Current assets:
Materials = EUR 15,000 Furniture = EUR
35,000
Balance sheet items for office materials + EUR 20,000
Equity = 20,000Liabilities (outside capital):
Loan from the bank = EUR 80,000
balance sheet item for liability (purchase on account) + EUR 20,000
Total active side: 120,000 euros Total on the passive side: 120,000 euros

Conclusion

In addition to the asset swap, the passive swap and the active-passive reduction, the increase in assets and liabilities is an important aspect of accounting. The main focus here is on increasing the balance sheet total on both sides, the active and the passive. This also distinguishes the increase in assets and liabilities from the other scenarios that can arise in everyday business transactions.

Active-passive Increase