Current Assets

Current assets are assets that are expected to be used or converted into cash within one year.

Explanation:
These include:

• Cash
• Accounts receivable
• Inventory
• Prepaid expenses
  They are listed on the balance sheet in order of liquidity.

Example:
A business with $3,000 in cash, $5,000 in inventory, and $2,000 in receivables has $10,000 in current assets.

Importance:
Current assets indicate short-term financial health and liquidity.

Common Confusion:
Don’t confuse current assets with fixed assets—they serve different purposes.