...& Kieso, 2011, p. 5). This system covers a broad array of information but in this paper the current and noncurrent assets will be defined, contrasted, and compared. In addition, the order of liquidity and how this practice applies to the balance sheet will be reviewed. Accounting is the means of communicating the numbers and to be successful in business the numbers have to be known “cold”. Therefore, it is imperative not only to communicate the numbers effectively but also to understand them to thrive in a world submerged with figures. Current Assets To understand assets, they first must be defined. Assets are resources such as land, computers, buildings, cash, and supplies owned by an organization. Cash is the most important asset that any business can possess. Consequently, cash is considered a current asset. Current assets are those resources that a business anticipates to replace with cash or deplete within 12 months or its operating cycle dependent upon whichever is farther away. The common practice for most businesses is the cutoff to be classified as current assets is one year from the balance sheet date. Current assets include short-term investments, cash, receivables, prepaid expenses, and inventories. For example, accounts receivable are current assets because a firm expects to collect payments and convert these payments to cash within one year. Businesses list current assets in the order in...
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...Current and noncurrent assets Becoming an effective accountant requires knowledge of terminologies that provide a better understanding of financial responsibilities and business processes. Accountants must provide information about concepts, definitions, and accounting terms. To prepare budgets, forecasts, and other financial duties an accountant must also understand basic accounting principles. Assets provide businesses and investors with revenue that can increase income profits or cause assets to decline. This summary will compare and contrast two assets that businesses and investors use to determine the financial status of a company. Additional topics to discuss include the order of liquidity for current and noncurrent assets and the levels of asset in the balance sheet. Current assets Assets are a type of revenue that businesses manage to increase revenue and achieve value. Kimmel, Weygandt, and Kieso (2007) add “Different types of assets are given different names” (p. 10). Companies also describe assets as current and noncurrent assets. Current assets include cash, accounts receivable, and inventory. These assets are highly liquid because they convert into cash within a one-year operating cycle. Companies with large amounts of current assets need to implement internal controls to safeguard assets. Current assets are also used to conduct day-to-day operations in the workplace. Noncurrent assets Noncurrent assets are another source of revenue that companies...
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...Current and Noncurrent Assets Paper Elizabeth Webb ACC/400 August 18, 2011 Frank Gutierrez Abstract The purpose of this paper is to address the meanings of current and noncurrent assets while stating their differences. The paper will also include what the order of liquidity is and how it applies to the balance sheet. Current and Noncurrent Assets Paper Current Assets Current assets, also known as short-term, “are cash and other resources that are reasonably expected to be realized in cash or sold or consumed within one year of the balance sheet date or the company's operating cycle, whichever is longer” (simplestudies.com). Current assets is also a balance sheet item that will equal the total of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash in less than one year. A company's creditors will often be interested in how much that company has in current assets, since these assets can be easily liquidated in case the company goes bankrupt. In addition, current assets are important to most companies as a source of funds for day-to-day operations. Noncurrent Assets Noncurrent assets, also known as long-term, are assets that are not easily converted into cash or that are not expected to turn into cash within the following year. Examples of noncurrent assets include fixed assets, leasehold improvements, and intangible assets. Noncurrent assets are the complete...
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...Current and noncurrent Assets In every business, the accounting department is an essential part in the maintenance of the organization. Understanding assets and their importance to the accounting process is imperative for any company. Without assets organizations could not operate. Current and noncurrent assets are the two assets this paper will address. In addition, this paper will also address the order of liquidity as well as how the order of liquidity applies to the balance sheet. Current Assets Current assets are cash and other resource that companies reasonably expect to convert to cash or use up within one-year or the operating cycle, whichever is longer (Kimmel, Weygandt, & Kieso, 2007). Current assets consist of cash, short-term investment, receivables, inventories, and pre-paid expenses. These types of assets are critical to the organization because they are a source of funds necessary for the day-to-day operation of the company. Noncurrent Assets Noncurrent assets are long-term assets that organizations intent to hold for at least a one-year period or longer and are not easily convertible to cash. Property, plant, and equipment and intangible assets (patents, trademarks, and licenses), and natural resources (mines, silver, and gold, etc.) are several types of noncurrent assets. These assets are important to the financial health of an organizations operation; they provide a constant source of revenue. Difference between current and noncurrent assets ...
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...Current and Noncurrent Assets Paper ACC/400 Current and Noncurrent Every organization must account for the various activities happening every day. This includes everything from the office supplies employees’ use daily, to the office supplies that stay and are used for years by employees. The basic or most generalized titles and items are included on the balance sheet, and here investors, company members, or the public can locate both current and noncurrent assets. These are both assets to the company and could be converted into cash if the company chooses. Below defines the differences between current and noncurrent assets, and it also describes liquidity of an asset. Current The basic definition of an asset is any item a company has that can be convert into cash or use within a year. Examples of an asset are staples, cash, accounts receivable, and short-term investments. These are items a company has that will be sold, paid-on, or remain as cash within a year, or 12 months. For anyone to start a business the person must have items, such as light, materials, and cash. These items are known as current assets and will either deteriorate or convert into cash in a year. A company will collect and convert an accounts receivable item into cash within a year, so it is a current asset. A company’s current assets tell its short-term liability paying ability. Non-Current Assets If an asset will not be converted into cash or used within a year it is a non-current asset...
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...Current and Noncurrent Assets Student ACC/440 September 16, 2013 Instructor The accounting department within any organization is a vital component in the maintenance of revenue budgets and calculated gains or losses. Understanding assets and their importance to the accounting process is vital for any organization. Assets are resources owned by a company, which is expected to expand the value of the organization or benefit the operations. Assets can be divided into two categories current, and noncurrent. This classification of assets is helpful because it helps establish if the company has enough assets to pay its debts when they come due (Kimmel, Weygandt & Kieso, 2007). The following paragraphs will discuss current and noncurrent assets, and the differences between the two assets. Also, it will address the order of liquidity and how the order of liquidity applies to the balance sheet. Current Assets Current assets, also known as short-term, “are cash and other resources that are reasonably expected to be realized in cash or sold or consumed within one year of the balance sheet date or the company's operating cycle, whichever is longer”. Current assets are also a balance sheet that will equal the total of cash equivalents and cash, prepaid expenses, marketable securities, accounts receivable, inventory, and additional assets that can be changed into cash within the operating cycle. Creditor’s interest will always be in the financial health of a...
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...in the black and white tables of assets and debits can, that the company is important and prosperous” (Schudson). Current and Noncurrent assets is important to have for any business. In this paper the subject is to discuss both of these and what the differences are between those. Also to understand the order of liquidity and the order of liquidity apply to the balance sheet. What are current assets? Current assets are the value of certain assets that can be converted into cash within a year or less. Current assets are important for any business to have because it provides the company the funds to operate day-to-day. Some of the current assets which a business may have on hand that can be easily converted into cash are inventory, accounts receivable, and cash itself. One way to look at it is that an owner of a restaurant recently received a shipment in of fruits and vegetables they can turn this into cash by serving many dishes with the fresh fruit and vegetables in it. Noncurrent assets are one that could not be turned in cash in a span 12 months or longer. This is also a necessity for any business to have. What noncurrent assets entails is equipment purchased for the business to operate, the plant or store itself. This is something that a company cannot sell right away but one could sell down the road to provide the business with upgrades. It may also provide enough cash to move into a bigger facility. A noncurrent asset like machinery and equipment is known...
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...The assets of the company can be classified into the two heads, namely the current assets and noncurrent assets. Current assets refers to the assets that will provide benefits to the firm not more than one year or the assets that are expected to be converted into the cash into one year (Current Assets, 2013). Current assets will include the cash and other assets that are likely to be converted into the cash or more likely to be used up within one year or one operating cycle, whichever is greater (What are differences between current and non-current assets or liabilities?, 2010). Common examples of the current asset include cash & cash equivalents, inventories, account receivables, marketable securities, prepaid expenses etc. Current assets reveal the information about the operation of the firm. The assets which provide future benefits to the company more than one year are termed as the noncurrent assets (Noncurrent Assets, 2013). Noncurrent assets are also termed as the long term assets. The benefits of the noncurrent assets to the firm will expand more than one year. Example of the noncurrent assets includes both the tangible and intangible assets. Tangible assets are those long term assets which have physical substances. Examples of the noncurrent tangible assets include plant, equipment, furniture & fixtures, land, buildings and natural resources. On the other hand, noncurrent intangible assets are those noncurrent assets which do not any physical substance. Examples of noncurrent...
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...Horizontal Analysis An increase in the total assets in 2010 by 18.28% as compared to base year 2009 can be attributed to the large percentage of increase in noncurrent assets. These accounts include intangible assets, goodwill, and other noncurrent assets. In addition to those, some current accounts such as prepaid expenses and biological assets contributed also to the increase in total assets. Using 2010 as a base year, there was a 28.27 % increase in total assets by 2011. This is largely attributable to the increase in investment on biological assets and other noncurrent assets accounts. There is also an increase in investment properties which are sources of additional cash and trade receivables from renting pieces of property to others. The increase in percentage of total assets dropped from 28.27% in 2011 to only 12.50 % by 2012. This is attributable to the minimal growth in several noncurrent assets which were the large contributors to total assets for the previous years. However, most current assets now have positive percentage increases, although cash and cash equivalents account remains negative. By 2013, there was a further decline in the increase of total assets, with only 6.23% as compared to 2012. This is largely attributable to the continuous decrease in investments on noncurrent assets which boosted increase in total assets in the previous years. In addition to that, several current assets accounts returned to their previous negative...
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...Comparing and Contrasting Current and Noncurrent Assets In financial accounting, a balance sheet statement is one of the main financial statements that managers and investors look at when looking at the financial health of any company. The balance sheet consists of assets, liabilities and ownership equity at a specific date in time. Most balance sheet statements are created to reflect the financial health of the company at the end of the company’s fiscal period. This paper will be focusing on comparing and contrasting the two categories of assets. Assets can be divided in to two categories; current and noncurrent asset. These two categories of assets are an essential part of financial statements and are found in the balance sheet statement of any company. Current assets are defined as “the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business” (“Current Assets”, n.d). Current assets include cash, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be easily changed into cash. Current assets in personal financing follow the same concept as assets in a company. Current assets in personal financing are all assets that a person can readily convert into cash to pay outstanding debts and cover liabilities without having to sell any of their fixed assets (“Current Assets”, n.d). Noncurrent or fixed assets are defined as a company’s long-term investments where...
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...Current and Noncurrent Assets Ernest Respi ACC/400 June 25, 2012 Lane Groff Current and Noncurrent Assets Accounting is a way a business records transactions, keeps financial records, performs audits, and reports information. Accounting shows profits and losses for a business at any given time, it shows assets and liabilities. This is an important part of every business; a business must know exactly where all its assets and liabilities are in order to grow. Accounting provides the methods to track assets and define if these assets or gains or losses, current and noncurrent assets is one way to category gains and losses. Current assets is “an asset such as receivables, inventory, work in process, or cash, that is constantly flowing in and out of an organization in the normal course of its business, as cash is converted into goods and then back into cash. In accounting, any asset expected to last or be in use for less than one year is considered a current asset” (Business dictionary). Current assets is the day to day business of a company, this assets is what a company uses to support the day to day function of the company. There are five main types of current assets cash or its equivalents, investments, account receivables, inventory and pre paid expenses. Current assets are found in financial records such as a balances sheet, this give stakeholder a way to view and track the company’s growth. Noncurrent assets is “an asset that is not expected to be turned into cash...
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...Current and Noncurrent Assets Paper ACC/400 Professor May 01, 2013 Comparing and contrasting current and noncurrent Current assets Current assets are also identified as liquid assets or short term assets. The Accounts Receivables department is where the most common current assets can be found. Furthermore, they can be found in the form of invoices. Current assets can be described as any assets that can be turned into cash in less than a year. Additional forms of current assets are things such as short-term investments, inventory, and cash. Many companies view current assets as all things that can be converted into cash within an operating cycle. This is a year for most companies. However, companies can have an operating cycle of more than a year; it is mainly according to their operating cycle. Noncurrent assets Noncurrent assets are basically the opposite of current asset. Noncurrent assets are considered to be long term assets. The noncurrent assets include things such as fixed assets, intangible assets and long-term investments. The noncurrent assets cannot be turned in cash within a normal operating cycle. The difference between the assets The main difference between current and noncurrent assets is that current assets can be turned into cash within a normal operating cycle and noncurrent assets cannot. The current asset is more of a short term and the noncurrent asset is more of an long term asset. The current...
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...company. The first exercise in this week’s assignment explores the method of calculating current assets, Shareholder’s equity, noncurrent assets and long term liabilities when values are given for inventories (840,000), total assets (2,800,000), current ratio (2.25) and debt to equity ratios (1.8). Data used is derived from the “current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories from the December 31, 2011 balance sheet”( Spiceland Sepe & Nelson, 2011, p.162).). The second exercise measures the impact (increase, decrease or no impact) of financial action on two liquidity ratios-current and quick- and a solvency ratio-debt-to-equity ratio. Finally, the third exercise identifies and explains deficiencies in the balance sheet of the Marcus Clothing Corporation Calculating ratios 1. Current assets Acid –test ratio =1.2, therefore 1.2 = (Current Assets –Inventory)/Current Liabilities 1.2 = (Current Assets-840000)/ Current Liabilities 1.2* Current Liabilities +840000=Current Assets Also, Current Ratio =2.25, therefore 2.25= Current Assets/Current Liabilities 2.25*Current Liabilities = Current Assets Therefore, 2.25 * Current Liabilities =1.2 *Current Liabilities +840000 (2.25-1.20)Current Liabilities=840000 1.05 Current Liabilities=840000 Current Liabilities =840000/1.05=800000 Current...
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...report studied the 2013 - 2014 period. 1. The Common-Size Analysis of the Assets, Liabilities and Shareholders' Equity Table 1. Assets Trend Analysis, in million USD Indicators | 2013 | 2014 | Absolute change, +/- | Percentage change, % | Cash, cash equivalents | 14259 | 13844 | -415 | -2.91 | Marketable securities (short-term investments) | 26287 | 11233 | -15054 | -57.27 | Receivables, net, current | 20641 | 27219 | 6578 | 31.87 | Inventory, net | 1764 | 2111 | 347 | 19.67 | Other assets, current | 10335 | 14124 | 3789 | 36.66 | CURRENT ASSETS (TOTAL) | 73286 | 68531 | -4755 | -6.49 | Property, plant and equipment, net | 16597 | 20624 | 4027 | 24.26 | Long-term investments, net | 106215 | 130162 | 23947 | 22.55 | Goodwill | 1577 | 4616 | 3039 | 192.71 | Intangible assets, net (excluding goodwill) | 4179 | 4142 | -37 | -0.89 | Other assets, noncurrent | 5146 | 3764 | -1382 | -26.86 | NONCURRENT ASSETS (TOTAL) | 133714 | 163308 | 29594 | 22.13 | ASSETS (TOTAL) | 207000 | 231839 | 24839 | 12 | It can be noticed from Table 1 that there was a tendency to increase in the total value of the assets. The percentage change was equal 12% in 2014. The value of the assets totalled USD 231,839 million at the end of 2014. The overall increase of the assets reflects a growth in the noncurrent assets by 22.13%, while the value of the...
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...Current and Noncurrent Assets Paper University of Phoenix ACC/400 John Opincar December 09, 2010 Current and Noncurrent Assets Paper The classified balance sheet displays a picture of a corporation’s financial status at any stage. To enhance user’s comprehension of an organization’s financials, the balance sheets are typically position in a specific order whereby, financial statements elements are categorize in subgroups such as current and noncurrent. These groups determine, for example, if the corporation has sufficient resources toward balances due, and the demands of immediate and continuing creditors on the corporation entire assets. This paper will explain the differences and similarities between current and noncurrent assets, define the order of liquidity, and how does the order of liquidity apply to the balance sheet. The current assets are assets, which a company anticipates to change to currency or spend by year-end. Classification as current assets is one-year from the balance sheet date for the majority of companies. For instance, a business will accumulate their accounts receivable known as current assets and change them to currency by year-end. Supplies are current assets and essential during operation; therefore, used by year-end. Classify assets and liabilities as current for a period longer than a year, by countless businesses because of their operating cycle. The business operating cycle is the standard period necessary to buy...
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