accounting Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...

, a current asset is an

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...

that can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current

fiscal year A fiscal year (also known as a financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. La ...

, operating cycle, or financial year. In simple terms, current assets are assets that are held for a short period. Current assets include

cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In book-keeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-i ...

, cash equivalents, short-term investments in companies in the process of being sold, accounts receivable, stock

inventory Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying ...

, supplies, and the prepaid liabilities that will be paid within a year. Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business. On a

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

, assets will typically be classified into current assets and long-term fixed assets. The current ratio is calculated by dividing total current assets by total

current liabilities Current liabilities in accounting refer to the liabilities of a business that are expected to be settled in cash within one fiscal year or the firm's operating cycle, whichever is longer.Drake, P. P., ''Financial ratio analysis'', p. 3, publish ...

. It is frequently used as an indicator of a company's accounting liquidity, which is its ability to meet short-term obligations. 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

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.

References

{{DEFAULTSORT:Current Asset Asset