Current and Noncurrent Assets
Current and Noncurrent Assets
Current Assets
A current asset is an asset such as cash, receivables, or inventory that can be converted into cash, consumed, or sold within a year’s time or a normal operating business cycle. These assets are listed on a company’s balance sheet as cash, unexpired insurance, accounts receivable, supplies, etc. and are expect to leave the balance sheet in the near future. Current assets get used up quickly and are used to pay current liabilities. Current assets are involved in creating the liquidity of a company (Schroeder, Clark, & Cathey, 2005).
Noncurrent Assets
A noncurrent asset is the exact opposite of a current asset. It is a fixed asset such as plants, buildings, and equipment. It is a company’s long-term investments. The full value cannot be determined within a year’s time. A noncurrent asset cannot be easily converted into cash. It is held for longer terms and usually more profitable than a current asset. They cannot be sold to the general consumer base and are liable to undergo depreciation over time (Kimmel, Weygandt, & Kieso, 2007).
Difference between Current and Noncurrent Assets How soon it can be liquidated is the main difference between current and noncurrent assets. Current assets are those that are readily available to be sold, lent, or leased in order to produce income or generate value in the near future. Noncurrent assets are long-term and cannot be liquidated in a short period of time. On the balance sheet current assets appear as cash at hand, cash in the bank, receivable bills of exchange, and so forth. Current assets are used for financial operations. Noncurrent assets remain with the company for long periods of time. These assets have a value that is useful in generating income for the company. Current and noncurrent assets are both as important to the company. Both current and noncurrent assets count towards the total revenue generated for the company.
Order of Liquidity Applies to Balance
Current Assets
A current asset is an asset such as cash, receivables, or inventory that can be converted into cash, consumed, or sold within a year’s time or a normal operating business cycle. These assets are listed on a company’s balance sheet as cash, unexpired insurance, accounts receivable, supplies, etc. and are expect to leave the balance sheet in the near future. Current assets get used up quickly and are used to pay current liabilities. Current assets are involved in creating the liquidity of a company (Schroeder, Clark, & Cathey, 2005).
Noncurrent Assets
A noncurrent asset is the exact opposite of a current asset. It is a fixed asset such as plants, buildings, and equipment. It is a company’s long-term investments. The full value cannot be determined within a year’s time. A noncurrent asset cannot be easily converted into cash. It is held for longer terms and usually more profitable than a current asset. They cannot be sold to the general consumer base and are liable to undergo depreciation over time (Kimmel, Weygandt, & Kieso, 2007).
Difference between Current and Noncurrent Assets How soon it can be liquidated is the main difference between current and noncurrent assets. Current assets are those that are readily available to be sold, lent, or leased in order to produce income or generate value in the near future. Noncurrent assets are long-term and cannot be liquidated in a short period of time. On the balance sheet current assets appear as cash at hand, cash in the bank, receivable bills of exchange, and so forth. Current assets are used for financial operations. Noncurrent assets remain with the company for long periods of time. These assets have a value that is useful in generating income for the company. Current and noncurrent assets are both as important to the company. Both current and noncurrent assets count towards the total revenue generated for the company.
Order of Liquidity Applies to Balance
References: Bragg, S. (2011, October 26). What is order of liquidity? Retrieved September 2, 2013, from Accounting Tools: http://www.accountingtools.com/questions-and-answers/what-is- order-of-liquidity.htmlWalmart Corporate- Our Story. (n.d.). Retrieved July 30, 2013, from Walmart: http://corporate.walmart.com/our-story/ Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2007). Financial accounting: Tools for business decision making (4th ed.). Hoboken, NJ: John Wiley & Sons. Schroeder, R. G, Clark, M. W., & Cathey, J. M. (2005). Financial accounting theory and analysis (8th ed.). Hoboken, NJ: John Wiley & Sons.