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Current and Noncurrent Assets


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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 use to conduct business. Noncurrent assets, also known as fixed assets, provide benefits to companies and investors after a one-year period. Real estate, buildings, and equipment are examples of noncurrent assets. Noncurrent assets also provide companies with a continual source of income because of the long term commitments that these holdings provide. Noncurrent assets are not liquid

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