Current asset

{{Short description|Assets held for less than a fiscal year}} {{Merge to|Asset|discuss=Talk:Asset#Merge proposal|date=March 2026}} {{Accounting}} In accounting, a '''current asset''' is an asset that can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year, operating cycle, or financial year. In simple terms, current assets are assets that are held for a short period.

Current assets include cash, cash equivalents, short-term investments in companies in the process of being sold, accounts receivable, stock inventory, supplies, and the prepaid liabilities that will be paid within a year.<ref>J. Downes, J.E. Goodman, "Dictionary of Finance & Investment Terms", Barons Financial Guides, 2003; and J. G. Siegel, N. Dauber & J. K. Shim, "The Vest Pocket CPA", Wiley, 2005.</ref> Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business. On a balance sheet, assets will typically be classified into current assets and long-term fixed assets.<ref>Larry M. Walther, Christopher J. Skousen, "Long-Term Assets", Ventus Publishing ApS, 2009</ref>

The current ratio is calculated by dividing total current assets by total current liabilities.<ref>{{Cite web|url=https://corporatefinanceinstitute.com/resources/knowledge/finance/current-ratio-formula/|title=Current Ratio Formula - Examples, How to Calculate Current Ratio|website=Corporate Finance Institute|language=en-US|access-date=2019-12-03}}</ref> It is frequently used as an indicator of a company's accounting liquidity, which is its ability to meet short-term obligations.<ref>{{Cite web|url=https://www.thebalancesmb.com/liquidity-position-analysis-with-ratios-393233|title=Calculate Liquidity Position Using Financial Ratio Analysis|last=Peavler|first=Rosemary|website=The Balance Small Business|language=en|access-date=2019-12-03}}</ref> The difference between current assets and current liability is referred to as trade working capital.

The quick ratio, or acid-test ratio, measures the ability of a company to use its near-cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets are those that can be quickly turned into cash if necessary and may not be used for a substantial period of time such as twelve months.

== Classification == Under International Financial Reporting Standards, an asset is classified as current if it is expected to be realized, sold, or consumed in the entity’s normal operating cycle; is held primarily for trading; is expected to be realized within twelve months after the reporting period; or is cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.<ref>{{cite web |title=IAS 1 Presentation of Financial Statements |url=https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2024/issued/part-a/ias-1-presentation-of-financial-statements.pdf?bypass=on |website=IFRS Foundation |access-date=19 April 2026 }}</ref>

Current assets are presented separately from non-current assets on the balance sheet because the distinction helps users of financial statements assess an entity’s liquidity and working capital position.<ref>{{cite web |title=Beginners' Guide to Financial Statement |url=https://www.sec.gov/about/reports-publications/investorpubsbegfinstmtguide |website=U.S. Securities and Exchange Commission |access-date=19 April 2026 }}</ref>

==References== <references/>

Category:Asset