We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What are Current Assets?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Sometimes referred to as liquid assets, current assets are resources that are currently in the possession of the holder and could be converted into cash with a great deal of ease. Generally, these cash equivalents would demonstrate an ability to undergo this type of conversion within one calendar year or less from the current date. Just about every business and every household has resources that can reasonably be considered current assets.

One of the most easily identifiable forms is found in the Accounts Receivable of a company. In most cases, outstanding invoices issued to customers are expected to be paid according to the terms noted on the invoice. While 30 days is the norm for many businesses, it is not unusual for the terms of payment to be as much as 45 days from the invoice date before the invoice is considered overdue. Since payment of the outstanding invoices can be reasonably expected to occur in one year or less, outstanding Receivables are the perfect example of current assets.

Inventories are also good examples. This would include both raw materials that are intended for use in production, as well as finished goods on hand. The expectation is that the raw materials will be consumed in the manufacturing process within a calendar year, and the resulting finished goods will also be sold to customers within that same time frame.

Bonds and other marketable securities also are often considered to be current assets. This is true when the bond will mature within the one-year period, allowing the bondholder to recoup the original investment plus interest. In the case of stocks and other securities, if the expectation is to sell the securities at a profit within the next calendar year, they also can be considered part of this group of resources. This is especially true since stocks are usually easy to convert into cash when necessary.

One form that is sometimes overlooked is prepaid expense. For example, a homeowner may choose to pay for one year of services related to a utility, grounds keeping, or other recurring expense. Businesses also sometimes prepay for an ongoing service as a means of avoiding a monthly task of submitting payment. In both cases, the prepaid expense is carried on the balance sheet and can rightly be counted among the current assets if the total prepaid amount will be consumed within the calendar year.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By serenesurface — On Feb 09, 2011

@burcinc-- When you calculate current assets, you can only count assets which can be sold in one year or less. Investments can be counted, if again, you are able to sell them in less than one year. In terms of loans, no they cannot be counted as assets. Even though it appears like you have money in the bank, it's not really yours, its borrowed so that is not a current asset.

By burcinc — On Feb 09, 2011

What if the period of converting assets is more than one year, is it not considered a current asset? What about investments instead of cash? Or what if I have loans? Are these counted when calculating total current assets?

By ysmina — On Feb 08, 2011

Liquidity and current assets were subjects we studied in college economics. The piece of information that really stuck with me from then, is that money is a liquid asset. It's the most basic liquid asset because it can be sold (spent) immediately. The longer it takes for an asset to be converted to something else, the less liquidity that asset has.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.