Can you share a list of current assets?

Definition

Current assets are defined as cash and other assets that are expected to be converted into cash or consumed in the production of goods or rendering of services in the normal course of business.

Or in other words, we can say that the expected realization period is less than the operating cycle period although it is more than the period of 12 months from the date of the balance sheet.

For example, goods are purchased with the purpose to resell and earn a profit, debtors exist to convert them into cash i.e., receive the amount from them, bills receivable exist again for receiving cash against it, etc.

List of current assets

The list of current assets is as follows:-

• Cash in hand
• Cash equivalents
• Bills receivables
• Sundry debtors
• Prepaid expenses
• Accrued income
• Closing stock
• Short-term investments ( marketable securities )
• Other liquid assets

Now here are a few definitions for the above list of current assets which are as follows:-

• Cash in hand

Cash comprises cash on hand and demand deposits with banks.

• Cash equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

• Bills receivables

It means a bill of exchange accepted by the debtor, the amount of which will be received on the specific date.

• Sundry debtors

A debtor is a person or entity who owes an amount to an enterprise against credit sales of goods and/or services rendered.

• Prepaid expenses

Expense that has been paid in advance and benefit of which will be available in the following years or year.

• Accrued income

Income that has been earned in the accounting period but in respect of which no enforceable claim has become due in that period by the enterprise.

• Closing stock

Stock or inventory at the end of the accounting period which is shown in the balance sheet and which is valued on the basis of the “ cost or net realizable value, whichever is lower “ principle is called closing stock.

• Short term investment

Investments that are also known as marketable securities and are held for a temporary period of time i.e, for less than 12 months, and can be easily converted into cash are called short-term investments.

Criteria for classification

Now let us see the classification of assets in the case of companies as per Schedule III of the Companies act 2013.

An asset is a current asset if it satisfies any one of the following criteria which are as follows:-

• It is held primarily for the purpose of being traded.

• It is expected to be realized in or is intended for sale or consumption in the company’s normal operating cycle.

• It is expected to be realized within 12 months from the reporting date.

• It is cash and cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.