what are current assets 
the current assets account is a balance sheet line item listed under the assets section which accounts for all company owned assets that can be converted to cash within one year assets whose value is recorded in the current assets account are considered current assets current assets include cash cash equivalents accounts receivable stock inventory marketable securities pre paid liabilities and other liquid assets current assets may also be called current accounts investopedia matthew collinsunderstanding current assetspublicly owned companies must adhere to generally accepted accounting principles and reporting procedures following these principles and practices financial statements must be generated with specific line items that create transparency for interested parties one of these statements is the balance sheet which lists a company s assets liabilities and shareholders equity current assets is always the first account listed in a company s balance sheet under the assets section it is comprised of sub accounts that make up the current assets account 1 for example apple inc lists several sub accounts under current assets that combine to make up total current assets which is the value of all current assets sub accounts this section is important for investors because it shows the company s short term liquidity according to apple s balance sheet for fiscal year 2023 it had 143 million in the current assets account it could convert to cash within one year 2 this short term liquidity is vital if apple were to experience issues paying its short term obligations it could liquidate these assets to help cover these debts depending on the nature of the business and the products it markets current assets can range from barrels of crude oil fabricated goods inventory for works in progress raw materials or foreign currency types of current assetsmany assets can be considered current by different businesses throughout all industries in general most industries group their current assets into these sub accounts however you might see others 3on the balance sheet the current asset sub accounts are normally displayed in order of current asset liquidity the assets most easily converted into cash are ranked higher by the finance division or accounting firm that prepared the report the order in which these accounts appear might differ because each business can account for the included assets differently by definition assets in the current assets account are cash or can be quickly converted to cash cash equivalents are certificates of deposit money market funds short term government bonds and treasury bills 4to qualify as current assets these items must not have any restrictions that inhibit their short term liquidity marketable securities is the account where the total value of liquid investments that can be quickly converted to cash without reducing their market value is entered 5 for example if shares of a company trade in very low volumes it may not be possible to convert them to cash without impacting their market value these shares would not be considered liquid and therefore would not have their value entered into the current assets account accounts receivable the value of all money due to a company for goods or services delivered or used but not yet paid for by customers is entered in current assets as long as the accounts can be expected to be paid within a year 6 if a business makes sales by offering longer credit terms to its customers some of its receivables may not be included in the current assets account if an account is never collected it is entered as a bad debt expense and not included in the current assets account it is also possible that some receivables are not expected to be collected on this consideration is reflected in the allowance for doubtful accounts a sub account whose value is subtracted from the accounts receivable account inventory which represents raw materials components and finished products is included in the current assets account 7 however different accounting methods can adjust inventory at times it may not be as liquid as other qualified current assets depending on the product and the industry sector for example there is little or no guarantee that a dozen units of high cost heavy earth moving equipment may be sold over the next year but there is a relatively high chance of a successful sale of a thousand umbrellas in the coming rainy season for these reasons you should view inventory with a skeptical eye read through the company reports or browse the internet to determine what is going on with a company s inventory it might also just be standard practice or a trend in the industry for inventory to be at specific levels inventory also blocks working capital if demand shifts unexpectedly which is more common in some industries than others inventory can become backlogged prepaid expenses which represent advance payments made by a company for goods and services to be received in the future are considered current assets although they cannot be converted into cash they are payments already made these payments free up capital for other uses prepaid expenses might include payments to insurance companies or contractors 8many companies categorize liquid investments into the marketable securities account but some can be accounted for in the other short term investments account an example would be excess funds invested in a short term security putting the funds to work but keeping the option of accessing them if needed current assets vs non current assetsif current assets are those which can be converted to cash within one year non current assets are those which cannot be converted within one year on a balance sheet you might find some of the same asset accounts under current assets and non current assets this is because those same types of assets might be tied up for a longer period such as a marketable security that cannot be sold in one year s time or which would be sold for much less than their purchase price property plants buildings facilities equipment and other illiquid investments are all examples of non current assets because they can take a significant amount of time to sell non current assets are also valued at their purchase price because they are held for longer times and depreciate 9 current assets are valued at fair market value and don t depreciate formula for current assetsthe total current assets formulation is a simple summation of all the assets that can be converted to cash within one year if a current asset subcategory is not listed in this formula you can add it to other liquid assets you gather the current asset information from a balance sheet and add it typically it is already totaled up for you on the balance sheet under total current assets current assets c ce i ar ms pe olawhere c cashce cash equivalentsi inventoryar accounts receivablems marketable securitiespe prepaid expensesola other liquid assets begin aligned text current assets c ce i ar ms pe ola textbf where text c cash text ce cash equivalents text i inventory text ar accounts receivable text ms marketable securities text pe prepaid expenses text ola other liquid assets end aligned current assets c ce i ar ms pe olawhere c cashce cash equivalentsi inventoryar accounts receivablems marketable securitiespe prepaid expensesola other liquid assets real world exampleleading retailer walmart inc s wmt total current assets for the 2024 fiscal year was 76 9 billion 10in comparison for fy 2023 microsoft corp s msft total current assets was 184 3 billion 11