Current and Non Current Assets

Current and Noncurrent Assets

Current assets are the resources that a company can turn into cash within a business cycle. The business cycle is usually a year. Current assets are cash, inventory, accounts receivable, supplies, and other assets that can be readily turned into cash. Current assets are a line item on the company’s balance sheet.

A noncurrent asset is the opposite of a current asset. These are assets that cannot be converted to cash easily. Noncurrent assets can be classified into one of three categories, fixed assets, long-term investments, and intangible assets. According to XXXX examples of fixed assets are the company’s property, equipment, office equipment, cars, and buildings. Long-term investments are stocks, bonds, and notes. Non physical assets cannot be physically touched. Some types of these assets are intellectual property, trademarks, and patents. Noncurrent assets are also listed on the company’s balance sheet

The difference between current and noncurrent assets is how the assets are managed. . Current assets are sold to a consumer base to generate an income. For example a company that sells automobiles would label the automobiles as a current asset. The automobile is considered inventory and can be sold for cash within the business cycle. A taxi company also has automobiles; however, the automobile is considered a fixed asset. The purpose for the automobile is used in the production of a service. The taxi company purchased the automobile as a long term investment. Non-current assets also tend to stay in the business for a longer period of time than current assets. Usually non-current assets depreciate over time. Current assets are used in the daily operation and are used to meet short term business, and obligations goals.

The ability that one can convert an asset to cash within a period (usually one year) is called liquidity. The order of liquidity is the order assets are placed on a balance sheet in relation to how fast an item...