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Current assets are those assets which get converted into casha within six monthsb within one yearc between one year and three yearsd between three and five years

Byju's Answer Standard XII Business Studies

Fixed Capital and Working Capital

Current asset... Question

Current assets are those assets which get converted into cash

(a) within six months

(b) within one year

(d) between three and five years

Open in App Solution

Current assets are those assets which can be converted into cash or can be used to pay off liabilities within a time span of 12 months, i.e. one year. Some of the examples of current assets are cash, cash equivalents, inventories, debtors, bills receivables, etc.

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Current Assets: What It Means and How to Calculate It, With Examples

Current Assets is an account on a balance sheet that represents the value of all assets that could be converted into cash within one year.

CORPORATE FINANCE FINANCIAL STATEMENTS

Current Assets: What It Means and How to Calculate It, With Examples

By ADAM HAYES Updated September 02, 2022

Reviewed by MARGARET JAMES

Fact checked by SUZANNE KVILHAUG

Investopedia / Matthew Collins

What Are Current Assets?

The Current Assets account is a balance sheet line item listed under the Assets section, which accounts for all company-owned assets that can be converted to cash within one year. Assets whose value is recorded in the Current Assets account are considered current assets.

Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets. Current Assets may also be called Current Accounts.

KEY TAKEAWAYS:

Current Assets is an account listed on a balance sheet that shows the value of the assets owned by a company that can be converted to cash through liquidation, use, or sales within one year.

Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets.

The Current Assets account is important because it demonstrates a company's short-term liquidity and ability to pay its short-term obligations.

Current Assets

Understanding Current Assets

Publicly-owned companies must adhere to generally accepted accounting principles and reporting procedures. Following these principles and practices, financial statements must be generated with specific line items that create transparency for interested parties. One of these statements is the balance sheet, which lists a company's assets, liabilities, and shareholders' equity.

Current Assets is always the first account listed in a company's balance sheet under the Assets section. It is comprised of sub-accounts that make up the Current Assets account. For example, Apple, Inc. lists several sub-accountss under Current Assets that combine to make up total current assets, which is the value of all Current Assets sub-accounts.

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This section is important for investors because it shows the company's short-term liquidity. According to Apple's balance sheet, it had $135 million in the Current Assets account it could convert to cash within one year. This short-term liquidity is vital—if Apple were to experience issues paying its short-term obligations, it could liquidate these assets to help cover these debts.

Depending on the nature of the business and the products it markets, current assets can range from barrels of crude oil, fabricated goods, inventory for works in progress, raw materials, or foreign currency.

Types of Current Assets

Many assets can be considered current by different businesses throughout all industries. In general, most industries group their current assets into these sub-accounts; however, you might see others:

Cash and Cash Equivalents

Marketable Securities

Accounts Receivable Inventory

Prepaid Liabilities/Expenses

Other Short-Term Investments

On the balance sheet, the Current Asset sub-accounts are normally displayed in order of current asset liquidity. The assets most easily converted into cash are ranked higher by the finance division or accounting firm that prepared the report. The order in which these accounts appear might differ because each business can account for the included assets differently.

Cash and Cash Equivalents

By definition, assets in the Current Assets account are cash or can be quickly converted to cash. Cash equivalents are certificates of deposit, money market funds, short-term government bonds, and treasury bills.

To qualify as current assets, these items must not have any restrictions that inhibit their short-term liquidity.

Marketable Securities

Marketable Securities is the account where the total value of liquid investments that can be quickly converted to cash without reducing their market value is entered. For example, if shares of a company trade in very low volumes, it may not be possible to convert them to cash without impacting their market value. These shares would not be considered liquid and, therefore, would not have their value entered into the Current Assets account.

Accounts Receivable

Accounts Receivable—the value of all money due to a company for goods or services delivered or used but not yet paid for by customers—is entered in Current Assets as long as the accounts can be expected to be paid within a year. If a business makes sales by offering longer credit terms to its customers, some of its receivables may not be included in the Current Assets account.

If an account is never collected, it is entered as a bad debt expense and not included in the Current Assets account.

It is also possible that some receivables are not expected to be collected on. This consideration is reflected in the Allowance for Doubtful Accounts, a sub-account whose value is subtracted from the Accounts Receivable account.

Inventory

Inventory—which represents raw materials, components, and finished products—is included in the Current Assets account. However, different accounting methods can adjust inventory; at times, it may not be as liquid as other qualified current assets depending on the product and the industry sector.

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Current assets are those assets which get converted into casha wit

Current assets are those assets which get converted into casha within six monthsb within one yearc between one year and three yearsd between three and five years

Previous Question Next Question Question :

Current assets are those assets which get converted into casha within six monthsb within one yearc between one year and three yearsd between three and five years

Answer :

b Current assets are those assets which can be converted into cash or can be used to pay off liabilities within a time span of 12 months i.e. one year. Some of the examples of current assets are cash cash equivalents inventories debtors bills receivables etc.

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current assets are those assets which get converted into cash in

Mohammed

Current assets are those assets which get converted into casha within six monthsb within one yearc between one year and three yearsd between three and five years

Current Assets: What It Means and How to Calculate It, With Examples

Current Assets: What It Means and How to Calculate It, With Examples

What Are Current Assets?

KEY TAKEAWAYS:

Current Assets

Understanding Current Assets

Types of Current Assets

Cash and Cash Equivalents

Marketable Securities

Accounts Receivable

Inventory

Current assets are those assets which get converted into casha wit

Current assets are those assets which get converted into casha within six monthsb within one yearc between one year and three yearsd between three and five years

b Current assets are those assets which can be converted into cash or can be used to pay off liabilities within a time span of 12 months i.e. one year. Some of the examples of current assets are cash cash equivalents inventories debtors bills receivables etc.

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