Current Assets

In Accounting Glossary, current assets is that part of total assets which can be converted into cash with in one year. In the accounting cycle, one year is sufficient time to convert current assets in to cash or liquid form like deposits into banks. We can include cash, bank, stock, outstanding incomes, debtors, bill receivables, prepaid expenditures and short term investment  in current assets.

Current asset must be shown in the asset side of balance sheet. But during the year, if its record is done through journal entry in the books of company, then we have to pass some current assets' adjustment entry at the end of period and after this these assets will be shown both in profit and loss account and balance sheet.

For example: We will deduct prepaid expenditure from given expenditures in profit and loss account if these expenses are indirect. Otherwise, we deduct these expenses from direct expenditures. We will also show these prepaid expenditures in current assets in balance sheet.

Benefits of Current Assets for Company

 Financial analysis  is  done on the available data of current assets. Without information of current assets items, company can not manage inventory, debtor, cash and bank properly. Whole working capital and debtor management  are based on the available information of current assets of past years.