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Current Assets

Updated on May 11, 2021 , 3514 views

What are Current Assets?

A current asset is either cash or an asset that can be sold and converted into cash within a year. In other words, current assets are a Balance Sheet item that represents the value of all assets that is expected to be converted into cash within one year.

current-asset

A current asset is either cash or an asset that can be sold and converted into cash within a year. In other words, current assets are a balance sheet item that represents the value of all assets that is expected to be converted into cash within one year.

Categories of Assets

An asset is a resource a company owns and expects to receive future benefit from. There are five main categories of assets:

  • Current assets
  • Long-term investments
  • Property, plant, and equipment
  • Intangible assets
  • Other assets

Current assets are any assets or cash that a firm plans to either consume or turn into cash within one year or in the operating cycle of the asset, whichever is longer.

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Current Asset Formula

While calculating the current assets, it’s important to make sure that all assets classified as “current” are included in the calculation.

The current assets formula is:

Current Assets= (Cash & Cash Equivalents) + (Accounts Receivables) + (Inventory) + (Marketable Securities) + (Prepaid Expenses) + (Other liquid assets)

Calculation of Current Assets

To calculate current assets, all you have to do is add your short-term balance sheet assets together that can be converted into cash within one year.

Let’s say that your company’s short-term assets include the following on your balance sheet:

Assets Cost
Cash & Cash Equivalents INR 90,000
accounts receivable INR 30,000
Inventory INR 50,000
Marketable Securities INR 1,20,000
Prepaid Expenses INR 18,000

Based on the above data, your short-term assets are calculated as follows:

90,000 + 30,000 + 50,000 + 1,20,000 + 18,000= INR 3,08,000

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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