What is a Current Asset?

A Current Asset is defined as an asset that is already cash or is expected to be converted to cash in one year or less (an operating cycle.) Examples of current assets are Cash, Petty Cash, Accounts Receivable, Inventory, Short-term Notes Receivable. These assets are converted into cash through the normal business operations cycle. For example, Inventory is converted into Accounts Receivable when it is sold. Accounts Receivable is converted into Cash when customers of the business pay the invoice.

What is the Difference Between Current Assets and Non-current Assets?

Non-current assets represent long-term (longer than a year) investments for a business. Non-current assets usually are not easily convertible to cash and the intention is for the business to hold the assets. Example of non-current assets include Land, Buildings, Vehicles, Equipment, Trademarks, Patents, Copyrights, and long-term Investments.

Where are Current Assets Reported on the Financial Statements?

Current Assets are reported on the Balance Sheet in the Asset section. Current Assets are listed in order of liquidity (how close they are to being cash). On a classified Balance Sheet, assets are divided into categories or classifications. Non-current assets are listed after current assets.

The following image shows an example of the asset section of the Balance Sheet for Apple.

Example of an asset section of a Balance Sheet

For more about Current Assets, watch this video:

Video explaining Current Assets.
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Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit: https://accountinghowto.com/about/

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