In accounting, a current asset is any

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that ca ...

which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current

fiscal year A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many ju ...

or operating cycle or financial year (whichever period is longer). Typical current assets include

cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-immed ...

, cash equivalents, short-term investments which in the ordinary activity are mainly related to non-strategic companies in the process of being sold (usually as a result of private negotiations),

accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised b ...

, stock

inventory Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the sh ...

, supplies, and the portion of prepaid liabilities (sometimes referred to as prepaid expenses) which will be paid within a year. In simple words, assets which are held for a short period are known as current assets. Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business. On a

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a busine ...

, assets will typically be classified into current assets and long-term assets. The current ratio is calculated by dividing total current assets by total current liabilities. It is frequently used as an indicator of a company's

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liqu ...

, which is its ability to meet short-term obligations. The difference between current assets and current liability is referred to as

trade working capital In business finance, trade working capital (TWC) is the difference between current assets and current liabilities related to the everyday operations of a company A company, abbreviated as co., is a Legal personality, legal entity represent ...

. The quick ratio, or acid-test, measures the ability of a company to use its ''near cash'' or quick assets to extinguish or retire its current liabilities immediately. Quick assets are those that can be quickly turned into cash if necessary. It would not be used for substantial period of time such as, normally, twelve months.

References

{{DEFAULTSORT:Current Asset Asset