July 16, 2012
Current and Non-current Assets
Every organization must account for the various activities happening daily. This includes everything from the office supplies employees’ daily, to the office supplies that stay and are used for years by employees. The basic or most generalized titles and items are included on the balance sheet, and here is where investors, company members, or the public can locate both current and noncurrent assets. These are both assets to the company and could be converted into cash if the company chooses. Below defines the differences between current and noncurrent assets, and it also describes liquidity of an asset.
The basic definition of an asset is any item a company has that can be convert into cash or use within a year. Examples of an asset are staples, cash, accounts receivable, and short-term investments. These are items a company has that will be sold, paid-on, or remain as cash within a year, or 12 months. For anyone to start a business the person must have items, such as light, materials, and cash. These items are known as current assets and will either deteriorate or convert into cash in a year. An company will collect and convert an accounts receivable item into cash within a year, so it is a current asset. A company’s current assets tell its short-term liability paying ability.
If an asset will not be converted into cash or used within a year it is a non-current asset. Non-current assets are normally referred to as long-term investments on the balance sheet and in accounting. Non-current investments include investments in both stocks and bonds. Land and machinery are also considered a noncurrent asset because in most instances, these items will not be converted into cash...