Question

Which assets are included in Current Assets ?

Hint:

To identify a current asset, ask the question: "Will this asset be converted into cash or be used up within the next 12 months?" If the answer is yes, it is a current asset.

Answer 1

Current Assets are those assets that are expected to be converted into cash, sold, or consumed within the company's normal operating cycle or within one year from the date of the balance sheet, whichever is longer. They are essential for the day-to-day operations and represent the liquidity of the business.
The main assets included in Current Assets are:

Cash and Cash Equivalents: This is the most liquid asset and includes cash in hand, cash at bank, and highly liquid short-term investments that can be readily converted into a known amount of cash (e.g., treasury bills, commercial papers).

Accounts Receivable (or Debtors/Receivables): This represents the amount of money owed to the business by its customers for goods or services sold on credit.

Inventory (or Stock): This includes the value of:
Raw Materials: Materials waiting to be used in the production process.
Work-in-Progress (WIP): Partially finished goods.
Finished Goods: Completed products ready for sale.

Prepaid Expenses: These are expenses that have been paid in advance but whose benefits have not yet been received. Examples include prepaid rent, prepaid insurance.

Short-term Loans and Advances: Loans given by the company that are expected to be repaid within a year.

Marketable Securities: Short-term investments in shares or bonds of other companies that can be easily sold in the market.

Accrued Income: Income that has been earned but not yet received in cash (e.g., interest earned on an investment but not yet paid to the company).