Menu Close

What is Current Asset? Types, Major Elements and Examples

In this article, we will know what is current asset and its types, major elements and examples. Assets, in financial accounting, are the resources a company needs to run and grow its business. Assets are divided into two categories – Current Assets and Non-Current Assets, which appear on a company’s balance sheet and combine to form the company’s total assets.

What is Current Asset? Types, Major Elements and Examples

What is Current Asset

A current asset is an item on an entity’s balance sheet that is either cash, has a cash equivalent or that can be converted into cash within a year. If an organization’s operating cycle lasts longer than one year, an asset is classified as current as long as it is converted to cash within the operating cycle.

Current assets are assets that a company holds and can be easily sold or consumed and further leads to the conversion of liquid cash. For a company, a current asset is an important factor as it gives them a place to access funds and meet current business expenses on a day-to-day basis.

In other words, current asset can be interpreted as an asset which is expected to last only one year or less, is treated as current asset.

Current Assets = Cash + Cash Equivalents + Inventory + Accounts Receivable + Market Securities + Prepaid Expenses + Other Liquid Assets

Type of Current asset

  • cash and cash equivalent
  • list
  • ongoing projects
  • prepaid charges
  • Accounts receivable
  • marketable securities

Major Elements of Current Assets

  • trade and other receivables
  • list
  • Cash and cash equivalents
  • Short-term investments
  • Current Asset Formula

Examples of current assets

  • cash
  • Short-term investments
  • accounts receivable
  • list
  • easily destroyed
  • prepaid charges
  • any other liquid assets

Also Read –

Related Posts