Current and Noncurrent Assets Essay Sample
The intent of this paper is to discourse current and noncurrent assets. specify the differences and similarities between the two. and turn to what the order of liquidness is and how it applies to the balance sheet.
In concern an plus is defined as a belongings or equipment owned by a company that has a positive economic value. There are two chief types of assets: current assets and non-current assets. Current Asset
Current assets are assets that a company expects to change over to hard currency or usage within one twelvemonth ( Kimmel. Wegandt. & A ; Kieso. p. 49. 2007 ) . Common types of current assets are hard currency. short-run investings. receivables. stock lists. and postpaid disbursals. 1. Cash is considered current assets because it typically is used within a twelvemonth of it being stated on a balance sheet. 2. Short –term investings are investings that a company has made that will run out within a twelvemonth. Stocks and bonds are considered to be short-run investings. 3. Receivabless are money owed to the company by clients and are considered current assets because the company will roll up and change over to hard currency within a twelvemonth. 4. Inventories are stuffs or goods used by a concern that are considered current assets because the company expects to utilize them up within one twelvemonth. 5. Prepaid Expenses are assets that are recorded in the balance sheet as future payments for goods and services. An illustration of prepaid disbursals is Insurance. The cost of insurance is recorded in the balance sheet as future payments since the policy holder pays money upfront to cover the hazard. Non-current Assetss
Non-current assets are assets that are non easy exchangeable to hard currency or non expected to go hard currency within a twelvemonth. Some illustrations of non-current assets are fixed assets. intangible assets and long-run notes receivable. 1. Fixed assets are touchable stuff. belongings. or belongings that a concern owns. They are used for footings longer than one twelvemonth due to that they are non easy converted into hard currency within that clip. 2. Intangible assets are similar to fixed assets but are intangible assets such as right of first publications. patents. good will. and franchise. 3. Long-run notes receivables are non-current assets that will non be received within a twelvemonth from when they are listed in a balance sheet. Difference Between Current and Non-Current Assetss
The chief difference between current and non-current assets is the clip it takes for both assets to be used. sold. or received. Current assets are used or sold within a twelvemonth. Some illustrations of current assets are hard currency. supplies. and bank balance. Non-current assets are used or sold over a longer period than a twelvemonth. Examples of non-current assets are preferable stock. common stock. and liabilities. Order of Liquid
Order of liquidness are points listed on the balance sheet in the order in which they expect to be converted into hard currency. The order from highest to lowest liquidness in which the points are presented on a balance sheet are hard currency or hard currency equivalents. marketable securities. histories receivable. stock list. long-run assets. and intangible points ( Codija. 2012 ) . 1. Cash and Cash Equivalents- most liquid points. they are easy used to pay goods or services. 2. Marketable Securities – high liquid points that can be easy converted into hard currency. Examples of marketable securities are treasury measures and commercial paper. 3. Histories Receivable – tierce in the list. sum company expects to roll up from clients within the following months. 4. Inventory – short tem plus. these points can easy be sold if no longer needed. 5. Long-run Assets – frequently take long to sell. illustrations are machines or equipment. 6. Intangible Items – least liquid and difficult to value.
Assetss to a company are really of import as it defines the fiscal standing of the company. The more assets the company has the better off they are in money. Knowing what assets are easiest to change over to hard currency is besides really of import. In instance that a concern might necessitate hard currency it is of import to cognize where in what order to get down selling it’s assets.
Mentions
Kimmel. P. D. . Wegandt. J. J. . & A ; Kieso. D. E. ( 2007 ) . Tools for Business Decision Making ( 4th ed. ) . Retrieved from The University of Phoenix eBook Collection database. Codija. M. ( 2012 ) . What Does the Order of Liquidity Mean on the Balance Sheet? . Retrieved from hypertext transfer protocol: //www. ehow. com/info_8127074_order-liquidity-mean-balance-sheet. hypertext markup language
