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Current and Noncurrent Assets on the Balance Sheet

Assets are resources a company owns. They consist of both current and noncurrent resources. Current assets are ones the company expects to convert to cash or use in the business within one year of the balance sheet date. Noncurrent assets are ones the company reckons it will hold for at least one year.

Current assets for the balance sheet

Examples of current assets are cash, accounts receivable, and inventory.

  • Cash: Cash includes accounts such as the company’s operating checking account, which the business uses to receive customer payments and pay business expenses, or an imprest account, which keeps a fixed amount of cash in it (such as petty cash).

  • Accounts receivable: This account shows all money customers owe to a business for a completed sales transaction. For example, Business A sells merchandise to Business B with the agreement that B pay for the merchandise within 30 business days.

  • Inventory: Goods available for sale reflect on a merchandiser’s balance sheet in this account. A merchandiser is a retail business, like your neighborhood grocery store, that sells to the general public. For a manufacturing company, a business that makes the items merchandisers sell, this category also includes the raw materials used to make items.

  • Prepaid expenses: Prepaids are any expense the business pays for in advance, such as rent, insurance, office supplies, postage, travel expense, or advances to employees. They also list as current assets, as long as the company envisions receiving the benefit of the prepaid items within 12 months of the balance sheet date.

Noncurrent assets for the balance sheet

Long-term assets are ones the company reckons it will hold for at least one year. Typical examples of long-term assets are investments and property, plant, and equipment currently in use by the company in day-to-day operations.

  • Fixed assets: This category is the company’s property, plant, and equipment. The account includes long-lived assets, such as a car, land, buildings, office equipment, and computers.

  • Long-term investments: These investments are assets held by the company, such as bonds, stocks, or notes.

  • Intangible assets: These assets lack a physical presence (you can’t touch or feel them). Patents, trademarks, and goodwill classify as noncurrent assets.

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