Final answer:
Income arising from trust assets is distributed to beneficiaries, while liabilities are paid from the trust assets before distribution. The treatment depends on the type of trust and specific terms of the trust agreement.
Step-by-step explanation:
Income arising from trust assets refers to the revenue generated by the assets held in a trust, such as interest, dividends, or rental income. This income is typically distributed to the beneficiaries of the trust according to the terms of the trust agreement.
Liabilities arising from trust assets, on the other hand, may include expenses related to managing and maintaining the trust, such as legal fees or trustee fees.
The treatment of income and liabilities varies depending on the type of trust and the specific terms of the trust agreement. In some cases, income may be distributed to beneficiaries on a regular basis, while in others, it may be reinvested for the long-term benefit of the beneficiaries. Liabilities are typically paid from the trust assets before any income is distributed to beneficiaries.