In accounting, asset liability mismatch means balance sheet's asset is not matching with its liability. Either total assets may be more or less than its total liabilities.
If we have total liabilities which are more than our total assets, it means, if we sell total our all assets, we will not pay the full amount to our creditors. So, this position is of bankruptcy. So, we have to take the difference between asset and liabilities very serious.
Examples :
1st Example
Asset Liabilities Mismatch on the Basis of Currency Fluctuations
For example, Indian bank take the loan of $ 1,00,000 from USA at the rate of 9% and given it to Indian at the rate 10% rate. Ist day of balance sheet of India bank, liabilities and assets will be $1,00,000 but second day of balance sheet, we see asset mismatch due to increasing the value of dollar and decreasing the value of Indian currency. This mis-match is also called currency mismatch.
2nd Example
Interest Rate Mismatch
The lending rate and borrowing rates affect from market. If borrowing rate will increase and lending rate will decrease, it will increase the asset liability mismatch.
3rd Example
Bank Debt Mismatch
It means, Bank has collected money from depositor as liability for short period or medium period. If same money bank is invested into debt, there will be asset liability mismatch. Suppose, depositor withdraws the money. All the persons who will not pay the money.At that time. Bank has no cash asset and also dead bad debt asset. It means, other liabilities are increasing with double rate. Bad debt increases our liability. So, asset will less than liabilities and it is the situation of bankruptcy.
If we have total liabilities which are more than our total assets, it means, if we sell total our all assets, we will not pay the full amount to our creditors. So, this position is of bankruptcy. So, we have to take the difference between asset and liabilities very serious.
Examples :
1st Example
Asset Liabilities Mismatch on the Basis of Currency Fluctuations
For example, Indian bank take the loan of $ 1,00,000 from USA at the rate of 9% and given it to Indian at the rate 10% rate. Ist day of balance sheet of India bank, liabilities and assets will be $1,00,000 but second day of balance sheet, we see asset mismatch due to increasing the value of dollar and decreasing the value of Indian currency. This mis-match is also called currency mismatch.
2nd Example
Interest Rate Mismatch
The lending rate and borrowing rates affect from market. If borrowing rate will increase and lending rate will decrease, it will increase the asset liability mismatch.
3rd Example
Bank Debt Mismatch
It means, Bank has collected money from depositor as liability for short period or medium period. If same money bank is invested into debt, there will be asset liability mismatch. Suppose, depositor withdraws the money. All the persons who will not pay the money.At that time. Bank has no cash asset and also dead bad debt asset. It means, other liabilities are increasing with double rate. Bad debt increases our liability. So, asset will less than liabilities and it is the situation of bankruptcy.
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