In today’s post, and as a way of continuing to break down the basic accounting of companies, we are going to go into the precise definition and description of current assets, terms that are included in the Formación accounting course.
Current assets in basic accounting
current assets
When we talk about current assets, we are referring to those assets and rights of the company that can be easily sold (turned into liquid and current money). Next we are going to analyze the different elements that are part of the current asset so that you understand what it consists of:
- Non-current assets held for sale: When we talk about a non-current asset held for sale, we are referring to a good or right thanks to which the company intends to recover its book value by selling it, not by its continued use over time.. An example of a non-current asset held for sale would be, for example, a car that the company decides to sell after having used it for a while.
- Stock: When we talk about stocks, we are referring to the goods that are in the company with the purpose of being sold or they are raw materials destined to the creation of the final product.
- Commercial debtors: These are the collection rights or credits that the company has in favor, that is, the credits with third parties that must pay it an amount of money. They range from debts for the sale of their products, to loans made to their own workers, or amounts of money pending receipt by the Tax Administration.
- Short-term investments in group companies and associates: In the case of short-term financial investments in group companies, the company has a loan with a maturity of less than one year with another of the same group or associate. It is considered a current asset due to its short return time, therefore, as the money comes out of the box, it is expected that it will return within a period of no more than 365 days.
- Short-term financial investments: Unlike the previous ones, short-term financial investments are not related to group or associated companies, but are transactions with third parties, also with a repayment period of less than one year, and which will contain the capital plus accrued interest. in this period.
- Cash and other equivalent liquid assets: In the case of cash and other liquid assets, we are referring to the treasury and box of the company, it is money that it can dispose of immediately without going through a sale. It is the money itself.
But to better understand what current assets are, we must also know non-current assets.
Non-current assets
In order to understand current assets, it is inevitable that we refer to non-current assets, and in this way you can contrast the importance of one and enter into basic accounting and its balance sheets. Well then, when we talk about non-current assets we are referring to all the assets of the company whose expiration or realization period will occur in a period of more than one year. In the case of non-current assets we also find a classification, which we are not going to define in as much detail as we have done with current assets since it is the post at hand, but we are going to list:
- Intangible assets: such as intellectual property or goodwill
- Inmobilized material: in this case we are talking about machinery, tools or furniture.
- Investment Property: As the name indicates, it is the purchase of real estate to subsequently obtain a benefit with them, either by selling them or by renting them.
- Property, plant and equipment in progress: the General Accounting Plan defines them as adaptation, construction or assembly works at the end of the financial year carried out prior to putting the different elements of property, plant and equipment into operating conditions, including those carried out on real estate.
- Long-term financial investments with related parties: It is the same case as current assets, but in this case with a repayment period of more than one year
- Other long-term financial investments: without being group companies and with a term of more than one year.
- Bonds and deposits constituted in the long term: such as money in financial institutions.
It is very important to know how to classify current assets from non-current assets within the company’s balance sheet, since thanks to this classification we will get to know the cash that our company can count on in the short term, either to make new investments, or to deal with payments from suppliers or banks. As you can appreciate in the post, all the elements of the balance are fitting together and constituting the financial situation of the company. That is why keeping accounts, even basic, of the company can help us to know in which aspects we are losing money and, in turn, how to invest it in a better way.
As for your opinion, which is always important after reading the post, did you know that non-current assets contained so many nuances? Now that we have broken down all the parts that make it up, do you think it is more important to have current assets or non-current assets on our company’s balance sheet?