Final answer:
Obligations to other entities on a balance sheet are classified as liabilities, shown on the right side of a T-account, which balances with assets and net worth.
Step-by-step explanation:
Obligations to other entities are classified as liabilities on the balance sheet. In a T-account, liabilities are shown on the right side, opposite assets on the left. The balance sheet's format underlines the fundamental accounting equation: assets equal liabilities plus net worth. A bank's liabilities, for example, include deposits made by customers that the bank owes back. Moreover, the net worth (also known as equity) is calculated by subtracting total liabilities from total assets, and it is also included on the liabilities side to ensure the T-account balances out. Therefore, whether a firm is flourishing or bankrupt, their assets must equal the sum of liabilities and net worth.