Question

How are current assets different from non-current assets? Can you provide an example of each?

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Answer 1

Defining Current Assets

Current assets are those assets that could be sold, lent or leased to produce some sort of an income or generate some value for the business in the near foreseeable future. Usually, current assets can be liquidated within one fiscal year or within one operating cycle for the company.

Unlike fixed or non-current assets, these assets are not long term assets, and they are involved in creating the liquidity of the company. Moreover, they are available to facilitate short term, day-to-day operational investments and costs.

Examples of current assets on a typical balance sheet are cash at hand, cash in bank, present debtors, receivable bills of exchange as well as other short-term investments, present inventories and prepaid expenditures for future services.

Defining Non-Current Assets

Non-current assets (also called fixed assets ), are assets that are stationery in nature. Moreover, they tend to remain in the business for a longer period of time. These assets are not involved in the day-to-day operations of the business, and cannot be used to meet short-term, operational obligations of the business.

Since these resources last for a very long time, companies spread their costs over several years. This helps avoid huge losses during years when capital expansions take place.

Examples of non-current assets include land, property, capital equipment, trademarks, long-term investments and even goodwill.

Current vs. Non-Current Assets

In the current assets vs. non-current assets debate and as far as the operational facet of the company goes, both current and non-current assets are equally important for the company. While current assets are involved and used for ready income-generation, non-current assets are generally involved with profit generation. In most accounting concepts, both current as well as non-current assets can even be intangible assets that generate profit for the venture. Both the assets together account for total revenue generated for a company