In the context of accounting, a current asset of a business indicates that type of asset which is expected to be liquidated (sold or disposed off) or used up within a short period of one year or within a business cycle. Generally, cash, cash equivalents, accounts receivable, inventory, the portion of prepaid accounts which will be used within a year form typical current assets. Current assets are shown separately in the balance sheet of the financial statements, whereas long term assets are separately grouped in the balance sheet.
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The current ratio, one of the accounting ratios, is derived dividing total current assets by total current liabilities.
- Major items in Current assets
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