Current and Noncurrent Assets

Current and Noncurrent Assets Paper

ACC/400

May 20, 2013

Current and Noncurrent Assets Paper

Assets give companies and investors the necessary revenue that can generate income for a business. When reviewing a balance sheet current and noncurrent assets can be found because they have to be accounted for. This essay will define current and noncurrent assets, and identify the differences between the two assets. In addition, this paper will also define the order of liquidity and the role it plays in regard to the balance sheet.

Current Assets

Current assets are resources that a company expects to replace with cash within 12 months or one operating cycle. Current assets are needed for a business to fund operations on a day-to-day basis. Current assets can help pay expenses that are ongoing. Current assets are cash, inventories, prepaid expenses, and accounts receivables. Both current assets and noncurrent assets can be found on the balance sheet. The liquidity of a company can be measured through current assets.

Noncurrent Assets

Noncurrent assets are assets not easily converted to cash and do not convert to cash within one year. Noncurrent assets are known as long –lived assets because they are not converted to cash within a year and take longer to achieve full value. These are long-term assets that can include goodwill, plant, property, equipment, intangible assets, and natural resources. Noncurrent assets are not used to meet short-term needs of the business and remain with the business for longer periods. Companies use noncurrent assets for future growth. Both current and noncurrent assets are equally important to the success of an organization.

Differences Between Current and Noncurrent Assets

Even though both types of assets are accountable for the total generated revenue for a company, they do have some differences. Current assets are used for ready income-generation whereas;...