ASSETS An asset is anything of value that your company owns including cash.

. Assets get recorded on the balance sheet in terms of their dollar/Rupee values. Even if you use credit to purchase an asset, you still own it. CURRENT ASSETS assets with dollar amounts that continually change For example: cash inventory

accounts receivable Or raw materials your company uses to make a product

In accounting, a current asset is an asset on the balance sheet which can either be converted to cash or used to pay current liabilities within 12 months. Typical current assets include cash, cash equivalents, short-term investments, accounts receivable, inventory and the portion of prepaid liabilities which will be paid within a year. On a balance sheet, assets will typically be classified into current assets and long-term assets. The current ratio is calculated by dividing total current assets by total current liabilities. It is frequently used as an indicator of a company's liquidity, its ability to meet short-term obligations.

Current assets are those assets that are expected to be used (sold or consumed) within a year, unlike fixed assets. Current assets are shown on the balance sheet, and are listed in order of increasing liquidity (i.e. how easy they are to convert to cash). Usually stocks will be listed first, followed by debtors, with cash last. The current asset position of a company is important, both for assessing its financial strength financial position (see current assets ratio) and for gauging its operational efficiency.

Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle (whichever is shorter), without disturbing the normal operations of a business. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets:

1.

Cash and cash equivalents it is the most liquid asset, which

includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts).

2. 3. 4.

Short-term investments include securities bought and held for sale in the

near future to generate income on short-term price differences (trading securities). Receivables usually reported as net of allowance for uncollectable accounts. Inventory trading these assets is a normal business of a company. The

inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule.

5.
entries.

Prepaid expenses these are expenses paid in cash and recorded as assets

before they are used or consumed (a common example is insurance). See also adjusting

The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities.

CURRENT LIABILITY
if a liability must be paid within a year, it is considered current. This includes: Bills money you owe to your vendors and suppliers employee payroll & short-term loans

In accounting, current liabilities are often understood as all liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle of a given firm, whichever period is longer. A more complete definition is that current liabilities are obligations that will be settled by current assets or by the creation of new current liabilities. An operating cycle for a firm is the average time that is required to go from cash to cash in producing revenues.[citation needed] For example, accounts payable for goods, services or supplies that were purchased for use in the operation of the business and payable within a normal period of time would be current liabilities.

Common Liability Accounts:

Current Liabilities: Notes Payable - Promissory notes to creditors. Accounts Payable - What you owe others on account. Unearned Revenue - You've been paid, but haven't delivered. Salaries Payable - Salaries you owe employees. Interest Payable - Interest you owe. Taxes Payable - Taxes you owe.

Examples of Current Assets: Cash Normally, cash is considered a current asset because it can be used within one

year after the balance sheet date. However, in certain situations, cash may be classified as a non-current asset. For example, if a company has restricted cash in a bank account (i.e. cash that can't be used), and restriction is for more than one year after the balance sheet date, then, this cash is considered non-current. Accounts Receivable Prepaid Expenses Accounts receivable are amounts expected to be collected from customers. Usually, collection is within one year, and thus, accounts receivable are considered a current asset. Prepaid expenses (e.g. prepaid insurance premiums) are usually used within a year after the balance sheet date and thus, are considered a current asset. However, if a company paid a premium for two years as of the balance sheet date, then, one half (one year) of the prepaid expenses balance will be current and the other half (another year) will be non-current.

Examples of Current Liabilities: Accounts Payable Accrued Expenses Accounts payables are obligations of a company to vendors, suppliers, etc. Such obligations are normally settled with current assets (e.g. cash), and thus, they are considered current liabilities. Accrued expenses may include accrued (i.e. incurred but not paid) utility charges, insurance payments, and others. Such accrued expenses are usually paid within a year after the balance sheet date, and therefore, they are considered current liabilities.