Definition of Current Asset
A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the company’s balance sheet. However, if a company has an operating cycle that is longer than one year, an asset that is expected to turn to cash within that longer operating cycle will be a current asset.
Current assets are usually presented first on the company’s balance sheet and they are arranged in their order of liquidity.
Current assets are also a key component of a company’s working capital and the current ratio.
Examples of Current Assets
Examples of current assets and the typical order of liquidity include:
- Cash and cash equivalents (which includes currency, checking accounts, petty cash, some U.S. Treasury Bills)
- Temporary investments
- Accounts receivable
- Inventory
- Supplies
- Prepaid expenses
