Current and Non Current Assets

Current and Noncurrent Assets

Assets in a business can be very important. The business owner may have or require multiple types of assets. Assets are said to be anything or person that hold value to the company. This paper will discuss what current and noncurrent assets are, the difference between current and noncurrent assets, what order of liquidity is and how the order of liquidity applies to balance sheets in a business.

What are current assets? Current assets are things a business owns or has possession of that can readily be turned into cash. These items or people can be traded or sold for cash within a one year cycle of the business. Current assets can include cash, short termed investments, accounts receivables and inventories. Short termed investments occur when companies have enough cash to invest in stocks and bonds. The stocks and bonds are invested to accrue more interest and faster than the cash would in a regular savings account. Accounts receivables are monies owed to the company by customers. This money is to be collected in exchange of services rendered by the company or equipment used by the customer depending on the type of company. Inventories for a business can be anything the company has readily available to the customer.

Noncurrent assets are those things that are not easily converted into cash within a year of the company's cycle. Not only are noncurrent assets hard to convert to cash, it is also not expected to turn into cash within a year by the company. Noncurrent assets can be the property associated with the business and the equipment needed to run the business on that property. Noncurrent assets are not needed in the daily function or operations of the company.

Current and noncurrent assets are both important to a business. Current assets are more involved in the day to day function and operation of the business. Current assets are also used for instant income making. Noncurrent assets are used more for long termed profiting in the company. Both current and noncurrent assets are reported on the balance sheet.

What is the order of liquidity? Order of liquidity is the way assets are organized on a balance sheet based on how long it will take the item to turn into cash or revenue for the company.