Current and Non-Current Assets, The Order of Liquidity

Subject  > Businesss Research Papers  > Accounting

Current assets are items on a balance sheet. According to Investorwords, current assets equal “…the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year,” (2008). If a company goes bankrupt, current assets are easily liquidated. Additionally, current assets are a source of funds for most companies. The importance of current assets to businesses is that these assets fund daily operations and expenses. Not only are current assets expected to be turned into cash, they many be sold, or consumed within a year. By contrast, non-current assets are not “…easily convertible to cash or not expected to become cash within the next year,” (Investorwords, ...

... investments are those that management intends holding for an extended period. Property, plant, and equipment are non-current assets next listed on the balance sheet in order of liquidity. Most 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 face 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

essay continues for another 100 words