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Let's talk about assets and liabilities. This is a pretty fundamental concept that you're gonna need to grasp. You probably already have a pretty good idea of what assets and liabilities are. When you think of assets, you think, "Oh, those things are good." And when you think of liabilities, you think those things are bad. You hear somebody say, "Oh, that guy's a real asset on the team," and you think, "Well, that's probably good. It's a good thing we have him on the team, right?" But what does that actually mean? So assets and liabilities, their definitions share a common starting point.
So both assets and liabilities represent probable future economic something. Okay? And so in accounting, just like in the real world, words have meaning. So what is probable? Well, obviously probable means it's likely. It's more likely than not going to be the case. Future means in the future. I'm telling you, this is very complicated. Economic. Okay, so when we think of economic, we think of basically monetary. So it's probably going to be, in the future, some sort of economic. And then on assets, we have an economic benefit, and on liabilities, we have economic sacrifice.
So this is the definition of asset. It is a probable future economic benefit. So in the future, it is likely that whatever this asset is will benefit us in an economic manner. Okay? For liabilities, it is a probable future economic sacrifice. So it's more likely than not that in the future, this, whatever it is, this liability, is going to have to cause us to sacrifice some sort of economic unit. So why is this word economic important? Well, because there could be things that are economic benefits that are emotional sacrifices, or there could be things that are emotional benefits that are economic sacrifices. But for the definition in accounting, all we care about is economic.
We don't care about emotions. We don't care about how it makes us look or how it makes us feel. All we care about is economics, right? So if we know that the definition of asset is a probable future economic benefit, let's take a look at a few things and see if we can classify them as assets or liabilities. We'll start simple.
Cash. Cash money. So now we can apply this to the definition. For cash, is it probable that in the future this is going to be an economic benefit? Well, yeah, cash is always an economic benefit. So we know that this one is an asset.
What about a loan? And we can call this a loan. We can call this a note payable. So this is why I say words have meaning. Okay, so you're looking at a loan, right? Now, what do you know about a loan? Well, you have to pay loans back, and if you just got student loans, you'll learn this someday. You have to pay loans back. So loans represent a probable future economic sacrifice, and why is that? Because in the future, you're going to have to sacrifice money to pay it back.
So a loan is a probable future economic sacrifice, which means it's a liability. So that makes enough sense, right? Let's look at one more. Let's take a look at accounts receivable. Now, you're gonna hear me say this a lot, but in accounting, words have meaning. Okay? So what is accounts receivable? Well, they are accounts that are able to be received. Well, what does an account that is able to be received mean? It means it's money that we're going to get someday because it is an account that we are able to receive. Okay, so how does that fit into our definition of asset or liability?
Well, if it's money that we're able to receive someday, that means probably in the future that's going to be an economic benefit. So because we are able to receive it, we're gonna say that