What Accounts Are Classified as Current Assets in Financial Statements

In financial statements, current assets are the accounts that a company can easily convert into cash within a year or less. These accounts are crucial for a company's short-term financial health.

Cash and cash equivalents, such as bank accounts and short-term investments, are considered current assets because they can be liquidated quickly. This is evident in the article section, which notes that cash and cash equivalents are typically classified as current assets.

Accounts receivable, which are amounts owed to a company by its customers, are also classified as current assets. This is because companies can usually collect these amounts within a year or less.

Inventory, which is the merchandise or supplies that a company sells, is another type of current asset. Companies can typically sell or use up their inventory within a year or less.

Current assets are expected to be consumed, sold, or converted into cash either in one year or in the operating cycle, whichever is longer.

These assets are typically presented in order of liquidity on the balance sheet, which means they're listed from the most easily converted to cash to the least.

Current assets include cash and cash equivalents, which are forms of liquid assets that can be quickly converted into cash.

Accounts receivables, which are amounts owed to a company by its customers, are also considered current assets.

Inventory is another type of current asset, which includes goods that a company plans to sell or use in its business operations.

Prepaid expenses, such as rent or insurance, are also classified as current assets because they will be used up or converted into cash within a short period of time.

Current assets are the lifeblood of any business, providing the funds needed to operate and grow. Cash is the most obvious current asset, but it's not the only one.

Cash and cash equivalents are the foundation of current assets, including money in the bank, cash registers, and petty cash drawers. These funds can be easily converted into cash, making them a liquid asset.

Accounts receivable is another type of current asset, representing the outstanding debts owed to a company by customers or clients. These debts are typically due within a year and can be quickly converted into cash.

Inventory is a current asset that includes merchandise purchased or made to sell to customers for a profit. This can range from pencils to cars, and even houses in some cases.

Prepaid expenses, such as insurance policies and rent payments, are also current assets. These expenses are paid in advance but will be consumed within the current period, freeing up capital for other purposes.

Marketable securities, short-term investments, and notes receivable are other types of current assets that can be quickly converted into cash.

Here are the main types of current assets:

These current assets are essential for any business, providing the funds needed to operate, grow, and invest in the future.

Cash and cash equivalents are a great example of current assets, as they can be easily converted into cash. Apple Inc.'s cash and cash equivalents increased from $20,289 Mn to $25,913 Mn from 2017 to 2018.

Accounts receivable is another important current asset, which is essentially a short-term loan to customers and vendors who purchase goods on account. Apple Inc.'s net account receivables increased from $17,874 Mn to $23,186 Mn from 2017 to 2018.

Inventory is the merchandise that a company purchases or makes to sell to customers for a profit. Apple Inc.'s inventories decreased from $4,855 Mn in 2017 to $3,956 Mn in 2018.

Prepaid expenses are expenses that have been paid before they were consumed, such as a six-month insurance policy. Apple Inc. did not have any prepaid expenses.

Investments in marketable securities are also considered current assets, but Apple Inc.'s investment in marketable securities decreased from $53,892 Mn to $40,388 Mn from 2017 to 2018.

Here are some examples of current assets:

Calculating current assets is a straightforward process that involves adding up various types of assets that can be converted to cash within one year.

To start, you'll want to list your current assets on your balance sheet in a specific order, which typically includes cash, cash equivalents, marketable securities, accounts receivable, inventory, supplies, prepaid expenses, and other liquid assets.

The formula for calculating current assets is simple: just add them all up. Current Assets = Cash + Cash Equivalents + Marketable Securities + Accounts Receivable + Inventory + Supplies + Prepaid Expenses + Other Liquid Assets.

Alternatively, you can use a more concise formula: Current Assets = C + CE + I + AR + MS + PE + OLA, where C is cash, CE is cash equivalents, I is inventory, AR is accounts receivable, MS is marketable securities, PE is prepaid expenses, and OLA is other liquid assets.

You can also break down the calculation into a more detailed list, which includes cash, cash equivalents, accounts receivable, inventory, prepaid expenses, investments, current portion of notes receivable, and current portion due from officer notes.

Here's a quick reference guide to help you calculate your current assets:

Remember, the key to calculating current assets is to identify the specific types of assets that can be converted to cash within one year and add them up using the formula.

Current Asset Reporting is a crucial aspect of financial statements. Current assets are always the first items listed in the assets section of the balance sheet.

On a balance sheet, current assets are presented in order of liquidity, starting with cash. This means that cash is listed first, followed by accounts receivable, inventory, prepaid expenses, short-term investments, and due from affiliates.

The balance sheet reports current assets at their fair market value or cost. For example, cash and accounts receivable are recorded at their cash values, while inventory is recorded at its cost. It's essential to evaluate and adjust these accounts throughout time with valuation accounts to ensure accuracy.

Walmart's balance sheet for the period ending Jan. 31, 2017, provides a clear example of current asset reporting. The company's current assets included cash and cash equivalents ($6,867,000), net receivables ($5,835,000), inventory ($43,046,000), and other current assets ($1,941,000). These amounts are reported in the order of liquidity, with cash listed first.

Here's a breakdown of Walmart's current assets:

Total current assets for Walmart totaled $57,689,000.

Current Asset Ratios are used to determine a company's ability to meet short-term financial obligations.

There are key ratios that use current assets, such as the liquidity ratios, which help assess a company's ability to meet current debt liabilities.

The quick ratio, also known as the acid-test ratio, is one such ratio that employs assets that can be expected to be converted to cash within 90 days.

The formula for the quick ratio is: Quick Ratio = (Cash and Cash Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities.

Investors and creditors use liquidity ratios to compare current assets with liabilities and other obligations of the company.

Common liquidity ratios include the current ratio, cash ratio, and acid test ratio.

Not all current assets are liquid, such as old, outdated inventory that can't be sold, and accounts receivable if customers and vendors won't pay their debts.