Home Wealth Creation What is a Current Asset?

What is a Current Asset?

by gbaf

In business accounting, a current asset is anything that is expected to be consumed, sold, or spent during the current operating year or current fiscal year. One can also include non-current assets such as goodwill and accounts receivable. For simplicity’s sake, the term current assets should not be used when discussing cash, assets, liabilities, revenue and expenses. Likewise, the term non-current assets should not be used when discussing financial assets such as accounts payable and accrued liabilities. For an example, if one reports an itemized profit for the period of January to March, the report will be an asset for the full year.

Current assets are very important to the management process. They help make balance sheet analysis and planning easier. A current asset refers to an item that is owned right now, in the current period. On the other hand, a non-current asset refers to something that might become the basis of some sort of claim or lawsuit in the future.

Cash is one of the most widely reported current assets. It is used to conduct company affairs and handle day to day transactions. Therefore, cash should be considered as a current asset. A company should always have cash on hand because it is an asset to be leveraged. The value of cash is related to the stock price of the company. Therefore, if the company sells all its stock, all of the cash that was part of the original stock will be reduced.

Most businesses consider their long-term investment in building and property as a current asset. Real estate is such a valuable investment for a reason. A company can always rent out a property. The company will not be obligated to pay the monthly rent if it does not own the property anymore. However, if the company does end up owning the land, then it can be used to make future profits from renting it out to people. If a company owns a building and does not use it to make money, it is considered a non-current asset.

The second part of assets is the intangibles part, which refers to non-financial assets. Intangibles are those things that are not physical but somehow related to a physical asset. An easy example of this is a customer list. Customers are the true core of any business. If a company does not have a good customer list, then it would be difficult for customers to do business with the company. Therefore, intangibles like customer lists are also considered as current liabilities.

Liability refers to things that are actually held by a company. All assets and liabilities are ultimately held by a company. So, assets that are not within the control of the company will be deemed as current liabilities. However, assets within the control of the company will be liabilities for tax purposes.

Current assets include accounts receivable and inventory. It is important for companies to manage their receivables and inventories because these are a key part of their sales process. It is also important to keep track of their inventory levels. In short, assets are all things that are associated with the actual production, sale or purchase of goods and services by a company.

Another part of what is a current asset? Insurance is another part. Basically, all types of insurance are considered as assets. Examples of all types of insurance are property insurance and casualty insurance. Basically, all companies own some type of insurance. This makes insurance one of the most important aspects for any business.

Another common example of assets is intellectual property. Intellectual property is any idea, procedure, method, program, concept or idea. The value of any of these assets will fluctuate greatly from company to company. For instance, if you work for a company and you develop a new product, your ideas may not be valuable right away, but if you market your product successfully, the value of your ideas will increase.

The last type of assets, we will discuss are fixed assets. Fixed assets are ones that will not change significantly from their current value in a competitive environment. Examples of fixed assets include inventory, accounts, and furniture. Inventory will be an item that does not change from year to year because it is always being replaced. Accountants will manage the inventory because it is generally considered to be a liability.

As you can see, answering the question, “what is a current asset?” can vary depending on who you ask. One answer might be an asset in a given year but might become an asset in a different year. Another answer could be completely different if you consider the assets to be immovable. Immovable assets such as cars, houses, and even equities in businesses are considered to be liabilities for tax purposes, so they are less valuable when valuing your assets.


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