Definition
The financial accounting term current assets is generally defined as cash and other assets that can be converted into cash within one year or one operating cycle, whichever is longer. Current assets are a subcategory of assets, which appear on a company's balance sheet.
Explanation
The line items included in current assets are usually listed in order of their liquidity. The items typically appearing in the category of current assets include: cash, marketable securities, accounts receivable, inventories, and prepaid items.
As a rule, current assets can be turned into cash, and used to pay a current liability within one year. As such, they are an important resource since they are often used to finance the day-to-day operation of a business.
Related Terms
Also known as a statement of financial position, the balance sheet is used to show the financial health of a company at a particular point in time. The balance sheet consists of assets, liabilities, and owner's equity in the company. It is one of the four key financial statements issued by public companies.
Moneyzine EditorNovember 6th, 2024
The accounting term used to describe an economic resource, which is owned by the corporation and expected to provide future benefits to its operation, is asset. Appearing on the balance sheet, assets are typically broken down into two categories:Moneyzine EditorNovember 6th, 2024
As it applies to the accounting discipline, cash includes paper money, coins, checks, money orders, and money on deposit with banks. In general, an item is classified as cash if a bank will accept it for deposit.Moneyzine EditorNovember 6th, 2024
The financial accounting term marketable security is used to describe both debt and equity securities held by a company. Marketable securities is a subset of short term investments, as such it appears on the company's balance sheet as a current asset.Moneyzine EditorNovember 6th, 2024
Also referred to as "receivables," this is the accounting term used to describe claims the company has against others for goods, services, or money. Accounts receivable are usually non-written promises to pay for goods or services received but not yet paid for by a customer.Moneyzine EditorNovember 6th, 2024
The financial accounting term inventory is used to describe the balance sheet line item that includes the value of raw materials, work in process, finished goods ready for sale, and returned goods that can be resold.Moneyzine EditorNovember 6th, 2024- The financial accounting term short-term investments refers to securities the company has purchased that can, and will be, sold in less than twelve months. Also known as temporary investments, short-term investments typically include marketable equity and debt securities as well as short-term paper.Moneyzine EditorNovember 6th, 2024
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The term liquidity is used to describe the relative time it takes until an asset is converted into cash, or the payment of a liability is due. Liquidity is a comparative term, meaning it may be easier to convert one asset into cash than another.Moneyzine EditorJanuary 23rd, 2024
The financial accounting term cash and cash equivalents refer to a company's assets that can be quickly turned into cash; these will be the company's most liquid holdings. Cash and cash equivalents appear in the current assets portion of the company's balance sheet.Moneyzine EditorJanuary 10th, 2024- The financial accounting term restricted cash and compensating balances refers to monies that are reserved and not generally available to the company. Restricted cash can include minimum balances on bank accounts, while compensating balances include money needed to repay a loan.Moneyzine EditorSeptember 21st, 2023
- The term short-term paper refers to debt securities issued at a discount, with maturities that range from ninety days to nine months. Short-term paper may be issued by government agencies, large financial institutions, or corporations. Examples of these securities include commercial paper, promissory notes, and Treasury bills.Moneyzine EditorSeptember 21st, 2023
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