Current Asset

Current assets are also called as liquid assets. Current assets are resources which are presently in the ownership of the holder and can be converted into real cash without much difficulty or simple way. Usually, current assets are called as cash equivalents, which would demonstrate a capacity to undergo this kind of conversion within one calendar year or less from the present date. Just about every household and every business have resources which could reasonably be considered as current assets. One of the most common types of current assets which could be found in a firm or company is the account receivable.  In many of the cases, outstanding invoices given to the clients are expected to be paid based on the terms mentioned on the invoice.  When 30 days is the standard for most of the businesses, it is not unusual for the terms of payment has to be in so far as 45 days from the invoice date before the invoice is considered overdue.  Because payment of the outstanding invoices could be reasonably expected to take place in one year or less, the perfect examples of the current assets are the outstanding receivables.

Another prime example of the current assets are the inventories, which could include both raw materials which are intended for  manufacturing  and the finished  goods for sale or on hand.   Since the expectation is that the raw materials would be used in the production process within the calendar year and the outcome of finished goods would also be sold to consumers within that same time period, counting the price or value of those two inventories as part of the current assets merely makes sense. Marketable securities and bonds also are often considered as current assets.

Questionnaire:

• What is current asset?
• Explain current asset by giving some examples.