A liability offset on a balance sheet is an ASSET that is used to reduce the amount of liabilities reported on the balance sheet. This is done by subtracting the value of the ASSET from the total liabilities, resulting in a lower net liability figure. Assets used for this purpose can include cash, investments, and other assets that can be easily converted into cash. The use of liability offsets is a common accounting practice and is used to improve the financial position of a company.