Question

what is permanent current asset

Answer 1

Answer:

Permanent Current assets

Permanent current assets are the minimum amount of current assets required by the business to smoothly run its current business operations. These are the current assets that are used for a shorter span of life and usually replaced by other current assets during a year of operations of the business. Examples of the permanent current assets are the inventory, assets that are depreciating very fast, cash and accounts receivable. These types of current assets are essentially required by the business to exist and operate.

Current assets can be divided into temporary and permanent current assets. A temporary current asset is a fluctuating asset and it came into being due to sudden change in some activity within the business. For example due to a seasonal demand there is a sudden increase in the sales that results in a sudden increase in the inventory to meet that sales demand and as a result there is a sudden increase in accounts receivable.

A growing company will show us three different types of assets and these are the fixed assets, permanent current assets and fluctuating current assets. Among these assets fixed assets are the long term assets and do not change easily whereas the fluctuating current assets are seasonal asset and are based on sudden increase or decrease in sales and the permanent current asset are always treated and financed like long term fixed assets however in actual they are not long term and have a short term life span such as a few years.