What Are Current Assets

What Are Current Assets

Can we take an example of ready food and raw food to describe the current assets? Yes, we can. Current assets are the readily available food that can satisfy hunger while raw food takes a lot of time. Raw food term can be used for those assets that are less liquid than the current assets.

What Are Current Assets?

Current assets are those assets that have a life of one year or less and can be easily converted into cash without having much risk of losing value. Current assets are recorded in the statement of financial position in the section of assets and under the heading of current assets.

Current assets are essential and play a vital role in the company paying short-term debts. These assets are more liquid as compared to fixed assets.

Creditors use the balance sheet to check the current assets and current liabilities to make sure whether the business can pay its short-term debts or not. The more the current assets the more chances for getting a loan.

What Are Current Assets

How To Calculate Current Assets

To calculate the current asset, follow this formula:

Current Asset = Cash + Cash Equivalents + Inventories + Bank + Account Receivables + Prepaid Expenses + Other Liquid Assets.

What Are The Examples Of Current Assets?

Followings are the most popular types of current assets used in the business:

  1. Cash
  2. Bank
  3. Account Receivable
  4. Marketable Securities
  5. Prepaid Rent
  6. Inventories
  7. Short Term Investment
  8. Petty Cash
  9. Advance Payment
  10. Interest Receivable
  11. Prepaid Insurance
  12. Notes Receivable
  13. Work In Progress is also a current asset for a business
  14. Bank Deposit
  15. Prepaid Tax, etc.

Current Assets FAQs

Which of the following is a current asset?

  1. Marketable Securities
  2. Machine
  3. Car
  4. Building

Marketable security is the best example of a current asset.

Is restricted cash a current asset?

Restricted cash is generally considered a current asset but it can be a non-current asset according to the time duration as per the agreement.

Is PPE a short-term asset account?

PPE(Property Plant and Equipment) is not a current asset but a fixed asset.

Is a fixed asset a current asset?

Fixed assets are not current assets these are non-current assets that take a lot of time to convert into cash.

Are marketable securities recorded as current assets in the balance sheet and why?

Yes, these are current assets because they can easily be converted into cash in a short time.

Is prepaid rent a current asset?

Yes, prepaid rent is a current asset because these are paid first and used later.

Is accumulated depreciation recorded as a current asset? and where it is recorded.

Accumulated depreciation is an expense and is deducted from the fixed assets in the balance sheet.

Is prepaid insurance a current asset?

Prepaid insurance is a current asset and can be converted and consumed within a short period.

Is cash recorded as a current asset in the statement of financial position?

Cash is a current asset because it is a readily financial instrument that can be used by a company within a short time.

Is equipment a current asset?

Equipment is not a current asset because they have a longer life, so it is a fixed asset.

Why are held-for-sale assets recorded as current assets? And how should held-for-sale assets be valued?

Normally held for-sale assets are classified as current assets because they are expected to sale within the business cycle which is normally one year. And they are valued at a lower value than carrying value or market value less cost of sale.

Which of the following is not a current asset?

  1. Cash
  2. Inventories
  3. Account Receivable
  4. Car

Car is not a current asset because it falls in the category of NCA.

Is short-term investment a current asset?

Yes, these are easy to turn into cash and can be used within a year.

Is interest receivable a current asset?

Yes, it is a current asset because it is expected to receive within a year.

Is finished goods inventory a current asset?

Yeah, finished goods are the current assets and are recorded in the balance as inventories under the heading of current assets.

Why are accounts receivable treated as a current asset?

Accounts receivable are typically classified as current assets because they are expected to be received within a business cycle.

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