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Current and Noncurrent Assets are Defined and Compared

Prepare a paper comparing and contrasting current and noncurrent assets. In your paper, address the following:

- What are current assets?
- What are noncurrent assets?
- What differs between current and noncurrent assets?
- What is the order of liquidity?
- How does the order of liquidity apply to the balance sheet?

Solution Preview


Assets are considered as resources owned by the firm and are of three categories - current assets, fixed assets, and other assets.

Current assets

Current assets include cash, accounts receivable, inventories, and prepaid expenses. The cash part of the current assets is intended to be used by the company in its current business operations. Accounts receivable are collectibles from customers who bought on credit. Inventories may take the form of raw materials, gods-in-process, and final products. Inventories have been considered as the most illiquid among all current assets because it takes a long process before it is converted into cash. If the inventories were raw materials, they must be converted into final products, sold, become accounts receivable, then collected and converted into cash. Hence, inventories take longer than accounts receivable to be converted into cash.

Prepaid expenses are those that the company ...

Solution Summary

The current and non-current assets are defined and compared. The order of liquidity is given.