أنشئ حسابًا أو سجّل الدخول للانضمام إلى مجتمعك المهني.
There are variety of current assets based upon the business stream. The best liquid ones is cash as part of the current assets. Conversion of current assets to money is phenomenon that depends upon the business activity of any organization. For instance, receivables are long hierarchy in terms of their conversion to cash and some of them might be unrecoverable. Similarly, stock and inventory is having more complex aging spectrum where some of the stock is even not convertible to cash. We might take examples of Due from Related Parties which might not be converted on short term basis into cash. There are lot of other current assets having same negatives. The best rationale practice in this regard is to emphasize more on collection and factoring functionality to run working capital of any business at optimum level.
Current assets get monetized within an year from today. However, in the case of concerns in the infra structure/long term projects, say construction of residential complexes, construction of roads etc, wherein the realizations take time, we find the situation where the current assets take more than one year to turn into "cash".
agree with answers >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
wait more details from our expert
Sure, Mohammed.
Generally, with respect to current assets classification,1 year is the time horizon. This is because the operating cycle of these companies is less than an year. In the instance of a cruise ship manufacturer, whose operating cycle may be more than a year (as it more time to build a ship and sell it), the classification of current assets changes.
As per the definition of current asset, if the operating cycle is more than a year and if the asset will be converted into cash within that operating cycle, then the asset will be classified as a current asset in the balance sheet. Answer to my question is the Balance sheet of Cruise Ship Manufacturer.
For nor so big companies (SME) it s tipical to see as a current asset, what it is called "account with administrator" (board members, family members), that account could stay for a long time since the family members are not going to give back the "deposit". So it is good for a liquidity test take away that account.
(sorry for my english)
A current assetis cash or any asset that can be reasonably converted to cash within one year.
Current assets typically include categories such as cash, marketable securities, short-term investments, accounts receivable , prepaid expenses, and inventory.
Restricted cash (that is, cash that cannot be withdrawn or used for current operations), depreciable assets, receivables that are not due in 12 months or less, and land are examples of things that are not current assets.
Why it Matters:Current assets are important because they indicate how much cash a company essentially has access to within the next 12 months outside of third-party sources. It is indicative of how the company funds its ongoing, day-to-day operations, and how liquid a firm is. The ratio of current assets to current liabilities is particularly important in judging liquidity.
Interesting question.
Normally Current assets are linked to one year but if the operating cycle of the company is one year in that case all the assets which can get converted into cash within operating cycle are stated as Current Assets
Other case could be: Interest accrued but not due (if you have placed Fixed Deposit for period of more than a year where interest shall be paid on maturity)
I would like to know other specific instances that you have in mind.