Current and Noncurrent Assets Paper
ACC/400 – Week One
Instructor’s Name: <Name>
Current and non-current assets are important items to evaluate a balance sheet. The following paper evaluates the meaning and differences between current and non-current assets. In addition to that, the paper will describe the order of liquidity and its application in a balance sheet.
A company’s balance sheet includes both current and non-current assets. The current assets are defined as the total sum of: * Cash and cash equivalents – Cash in hand or cash at bank * Accounts receivables – Amount that is expected to be collected from the customers within the current accounting cycle * Inventory – Goods or material in-stock or under processing which can be sold and converted into cash * Marketable securities – Very liquid securities that can be converted into cash within a short period of time, example commercial paper, and treasury bills etc. * Prepaid expenses – Goods or services that are realized over a period of time, but are paid in bulk at the beginning of accounting cycle. * Other current assets
Current Assets also include any other type of asset that could be liquidated in less than one year or the operating cycle (InvestorWords.com, 2010). These assets are important for the company to meet its daily operational expenses; also the creditors of a company are often interested in evaluating current assets, because these assets can be easily converted into cash to pay debts or in case the company goes bankrupt. Non-current assets on the other hand is the sum of fixed assets, intangible items, and leasehold improvements, which are more permanent in nature they cannot be easily convertible into cash or are not expected to get converted into cash, sold, or exchanged within the next year or operating cycle of the company (Stocks300, 2010). Common
References: Anonymous (2008), “Preparing a Balance Sheet,” Referenced <Date>, from http://www.va-interactive.com/inbusiness/editorial/finance/intemp/balance.html InvestorWords.com (2010), “Current Assets,” Referenced <Date>, from http://www.investorwords.com/1245/current_assets.html Stocks300 (2010), “Noncurrent Assets,” Referenced <Date>, from http://news.morningstar.com/classroom2/course.asp?docId=145091&page=4&CN=com