The assets which can be converted in to cash within one year are called current assets. It means these types of assets are consumed within twelve months or the value of these assets keeps on changing throughout the financial year. Day to day transactions of the firm change the value of current assets.
For example, if goods are being sold in cash, then the cash balance will be increased and the value of inventories will be reduced. A firm receives the payment from the creditors or pays some amount to debtors, the value of the creditors, debtors and cash or bank will automatically be changed with the amount of transactions. The value of current assets never remains fixed. Current assets are shown separately in assets side of balance sheet.
Following are the examples of current assets:-
- Sundry debtors or customers and bills receivables.
- Cash in hand.
- Cash at Bank
- Cost of Inventories or trading stock
- Marketable Securities.
- Loans & advance given
- Prepaid exp.
- Accrued income etc.
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