Compare and contrast current and non-current assets
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Compare and contrast current and non-current assets and address the following:
- what are current assets?
- what are non-current assets?
- what differs between current and non-current assets?
- what is the order of liquidity?
- how does the order of liquidity apply to the balance sheet?
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Solution Summary
The problem set deals with issues in accounting. The issues handled include the definition of assets, and the liquidity rule of the balance sheet.
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- What are current assets?
Within a company's balance sheet there are two forms of assets: fixed (non-current assets) and current assets.
Assets are the resources which the company is able to utilize in order to achieve its corporate objective. Assets are gained through past transactions or events. Take for example a company like Wal-Mart may gain stock through purchase or exchange etc.
Current assets are assets that must meet any the following criteria as set forth by International accounting standards (IAS) 1:
1. The resource must be held for the sole purpose of trading. For example, Wal-Mart sells general provisions and goods. They current assets may include all the provisions that would be sold as the firm's major business operation.
2. The resource must be quantifiable. It may either be cash or a cash equivalent. Simply put an asset must have a value.
3. It is expected that the resource would have been realized or sold within twelve months. This introduces the idea of accounting periods. A current asset is then referred to as the assets that would be used up within the current accounting period.
4. The ...
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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