Question

Consider credit, such as one receives from using a credit cardNow consider the money/cash available in one’s checking account. For the average consumer money (e.g cash in a person’s pocket) is_____ and credit is______

Answer 1

Cash is legal tender used to exchange goods, debt, or services. Sometimes it also includes assets that can be easily converted into cash  (like money balance in checking/deposit account). Cash transactions are settled immediately

Credit is the ability of a customer to purchase goods or services with the promise to pay for it later in future. Cash transactions are settled immediately subsequent to the transaction at a later date.

A credit card provides the cardholder credit to pay a merchant for goods and services in return for future payment plus the other agreed charges.

Hence,

For the average consumer money (e.g cash in a person’s pocket) is an asset and credit is a liability

Assets are valuable items owned by a person. They create cash inflow over the years.

Liabilities are financial obligations of person to other person/business. They create cash outflows over the years.