Current and Non-Current Assets Essay

topical assets argon items on a eternal rest public opinion poll. accord to Investorwords, flow assets equal the sum of gold and exchange equivalents, accounts receivable, inventory, marketable securities, postpaid expenses, and new(prenominal)(a) assets that could be transformed to capital in less than one year, (2008). If a gild goes bankrupt, catamenia assets be easily liquifiableated. Additionally, current assets be a source of monetary funds for most companies.The importance of current assets to businesses is that these assets fund daily operations and expenses. Not however ar current assets expected to be turned into cash, they m either be sold, or consumed inwardly a year. By contrast, non-current assets are not easily convertible to cash or not expected to make cash within the side by side(p) year, (Investorwords, 2008). Examples of non-current assets acknowledge fixed assets, leasehold improvements, and nonphysical assets, (Investorwords, 2008).The leavings between current and non-current assets imply time and form. Current assets are mean for use within one year, eyepatch non-current assets are not. If a guild owns inflict and a building as the union of its business, that conjunction is not going to convert the land and building,non-current assets, to cash within a year. The company keeps both the land and building for longer time-periods. Another example of the difference between the two types of assets is equipment, or machinery. The company uses the equipment for its daily operations, and will not be done with the equipment within a year. The equipment is a non-current asset. Equipment and machinery belonging to a company depreciates oer time. This is another characteristic of many non-current assets. Current assets do not depreciate within a year.Dividing assets and liabilities into current and non-current allows for the calculation of functional capital. This is the amount of current assets minus current liabil ities. Working capital is the relatively liquid social function of the companys monetary position.The Order of LiquidityAssets are listed on the residual sheet in locate of liquidity. Current assets come first. This drift begins with cash and cash equivalents, including temporary investments maturing within 90 days, but excluding cash restricted for purposes other than meeting current obligations. Next in the rewrite are short-term investments. Debt credential investments are separate as trading, available-for-sale, or held-to-maturity securities. Investments in equity securities are classified as either trading or available-for-sale securities. Trading and available-for-sale securities are report at fair value, while held-to-maturity securities are describe at amortized cost, (NACUBO, 2005).The order of liquidity on the isotropy sheet continues with receivables, which discloses the amounts of expected uncollectibles, nontrade receivables, and accounts pledged or discount ed. Inventories are the undermentioned part of current assets, in which a company discloses the basis of valuation, pricing method, and completion pose of manufactured inventories. Last in the order of current assets are prepaid expenses, although expenses prepaid past the current operating steering wheel are reported as deferred charges in the other asset section of the balance sheet, (NACUBO, 2008).The order of liquidity on the balance sheet moves toward non-current assets. long-term investments are the next item on the balance sheet. These embroil investments in securities, tangible fixed assets not currently used in operations, surplus funds, and investments in affiliated companies or nonconsolidated subsidiaries. Long-term investments are those that management intends holding for an lengthy period.Property, plant, and equipment are non-current assets next listed on the balance sheet in order of liquidity. or so of these assets are depreciable or consumable. The basis of valuation, any liens against the property, and accumulated depreciation or depletion is disclosed. Usually, a detailed classification of property, plant, and equipment is disclosed in a supplementary schedule, not the type of the balance sheet, (NACUBO, 2008).Intangible assets are next in the order of liquidity. Intangible assets are resources without physical substance providing economic rights and advantages. Limited-life intangible assets are amortized over their useful lives and reported net of the accumulated amortization. Indefinite-life intangible assets are not amortized instead, they are assessed periodically for impairment. some(prenominal) intangible assets expenditures are not capitalized, but expensed as incurred, (NACUBO, 2008).Last in the order of liquidity are other assets. This is a special classification for unusual items that cannot be included in one of the other asset categories. Examples include deferred charges, non-current receivables, and advances to subs idiaries. The classification of assets depends on the nature and the use of the item.Reference line of credit Accounting. (2003). Retrieved April 13, 2008 from URL http//home.millsaps.edu/Investorwords. (2008). Retrieved April 12, 2008 from URLhttp//www.investorwords.comNACUBO. (2008). Balance sheet classification. Retrieved April 13, 2008 from URLhttp//www.nacubo.org