...Current and Noncurrent Assets Paper Every business must have assets to generate income for the business. Businesses must account for all assets in their balance sheets regardless if what is being reported are assets or non-assets. Balance sheets are organized in a particular way so that financial statements fundamentals are arranged in subgroups. Some of the basic examples of assets consist of cash, accounts receivables, and prepaid expenses. Examples of non-current assets consist of fixed assets, intangible assets such as equipment and property, and long term notes receivables. This paper will analyze the meaning of assets and non-assets and compare and contrast the two terms. Current Assets Current assets are short-term assets that a company plans on using or converting within a fiscal year. These assets are defined as company property, which provide benefits to the company. Current assets can be sold, lent, or lease to produce income or help generate value for the business. On a balance sheet companies list the current assets on the top section as it is available to use for the company and they are listed in the order of liquidity. The assets that are listed are cash, short term investments, receivables, inventories, and prepaid expenses. Some company’s accounting and operating fiscal year are longer than one calendar to classify assets and liabilities (Kimmel, Weygandt, & Kieso, 2007). Non-Current Assets Non-current assets are investments made by the company that...
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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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...Working capital: Current assets minus current liabilities. Working capital measures how much in liquid asset as company has available to build its business. The number can be positive or negative, depending on how much debt the company is carrying. In general, companies that have a lot of working capital will be more successful since they can expand and improve their operations. Companies with negative working capital may lack the funds necessary for growth. also called net current assets or current capital. Current Assets: Current assets are those assets that are expected to be used (sold or consumed) within a year, unlike fixed assets. Current assets are shown on the balance sheet, and are listed in order of increasing liquidity (i.e. how easy they are to convert to cash). Usually stocks will be listed first, followed by debtors, with cash last. Current Liabilities: Liabilities that will be due within a short time (less than one year) and that are to be paid out of current assets are called current liabilities. The most common liabilities in this group are notes payable and account payable (c) The man problem that a business may face if there is no enough working capital is financial difficulties. With out proper funding a business cannot meet there day to day operations. Every business need some amount to purchase the raw material. Rate of return on investments also fall with the shortage of working capital. Excess working capital may result into over all inefficiency...
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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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...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 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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...value tangible non current assets “Valuing tangible non-current assets is subjective and complex and can therefore result in different companies valuing similar assets very differently.” Discuss this statement with specific regard to your knowledge of how tangible non-current assets discussion. Valuing tangible non-current assets can be subjective and complicated. This essay explains it from two aspects, costs of PPE and depreciation respectively, under the international accounting standards. Property, plant and equipment are the representative of tangible non-current assets which commonly are held by business entity. When to value assets the definition from the outset that should be understood is carrying account. According to IAS16, carrying amount is defined as” the amount at which an asset is recognized after deducting any accumulated depreciation and accumulated impairment losses”. Therefore, subjectivity of valuing tangible non-current assets can be attributed to recognized cost, accumulated depreciation. From the outset the cost should be measured after assets are recognized. This is the first step that confirms initial costs. When buying same assets, the costs can be totally different. For example, the items of assets can have many spare parts which may be minor or major for corporation usage. However, if the corporation defines that this spare parts is important-major spare parts, this amount should belong to part of costs of this assets. In contrary, it...
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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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...& 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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...have the leeway to report all assets at either their current market value or their original purchase price For purposes of consistency, reliability and comparability, companies should not have the freedom to report their assets at either current market or cost.Such an alternative reporting methodology would make it difficult for users of financials to make informed decisions because:1). inconsistent methods could be used from year to year (consistency); 2). companies could effectively set their own values for assets without reference to any objective standard (reliability); and 3). comparisons among companies in the same industry would become more problematic (comparability). The costprinciple under US GAAP requires companies to account and report most assets and liabilities at cost rather than fair market value(“FMV”).Cost is the purchased price, while FMV refers to the price at which the asset would change hands between a willing buyer and a willing seller, neither being under a compulsion to buy or to sell and both having reasonable knowledge of all relevant facts. Investors (with the potential to provide the capital that businesses need in order to grow) require consistency and reliability in reporting to assess a company’s financial strength.Likewise, creditors require accurate reporting in order to determine the solvency of a business--for example by analyzing ratios such as debt-to-assets (total liabilities divided by total assets). A higher ratio translates into...
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...BUSG 1301 Total Current Assets and Liabilities of Starbucks Corporation for past 4 years: Period Ending | Sept. 29, 2012 | Sept. 29, 2011 | Sept. 29, 2010 | Sept. 29, 2009 | Total Current Assets | 4.2B | 3.8B | 2.8B | 2.0B | Total Current Liabilities | 2.2B | 2.1B | 1.8B | 1.6B | As you can see from above chart, the total Current Assets of Starbucks has increased from $2.0 billion in 2009 to $4.2 billion in 2012. Its total Current Liabilities was 1.6 billion in 2009 and 2.2 billion in 2012. Starbucks total Accounts Receivable was $271 million in 2009 which increased to $485.9 million in 2012. This may be due to opening of increased number of stores. The company wrote off $5 million as bad debt in 2009, $3.3 million in 2011 and 5.6 million in 2012. Its Accounts Payable has increased from $267.1 billion in 2009 to 398.1billion in 2012. Although debt as a percent of total capital increased at Starbucks Corporation over the last fiscal year to 22.47%, it is still in-line with the Hotels, Restaurants and Leisure industry's norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Accounts Receivable are typical for the industry, although worsening, with 12.80 days worth of sales outstanding. Last, Starbucks Corporation is among the most efficient in its industry at managing inventories, with only 67.09 days of its Cost of Goods Sold tied up in inventory. Data Sources: ...
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... Current ratio. The current ratio is also called the working capital ratio, as working capital is the difference between current assets and current liabilities. This ratio measures the ability of a company to pay its current obligations using current assets. The current ratio is calculated by dividing current assets by current liabilities. 20X1 20X0 Current assets $38,366 $38,294 Current liabilities 27,945 30,347 Current ratio 1.4 : 1 1.3 : 1 This ratio indicates the company has more current assets than current liabilities. Different industries have different levels of expected liquidity. Whether the ratio is considered adequate coverage depends on the type of business, the components of its current assets, and the ability of the company to generate cash from its receivables and by selling inventory. Acid-test ratio. The acid-test ratio is also called the quick ratio. Quick assets are defined as cash, marketable (or short-term) securities, and accounts receivable and notes receivable, net of the allowances for doubtful accounts. These assets are considered to be very liquid (easy to obtain cash from the assets) and therefore, available for immediate use to pay obligations. The acid-test ratio is calculated by dividing quick assets by current liabilities. 20X1 20X0 Cash $6,950 $6,330 Accounts receivable, net 18,567 19,230 Quick Assets $25...
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...Increase assets and increase expenses. B. Increase assets and increase liabilities. C. Increase liabilities and increase paid-in capital. D. Have no effect on total assets. A journal entry recording an accrual: Answer A. Results in a better matching of revenues and expenses. B. Will involve a debit or credit to cash. C. Will affect balance sheet accounts only. D. Will most likely include a debit to a liability account. Which of the following is not a transaction to be recorded in the accounting records of an entity? Answer A. Investment of cash by the owners. B. Sale of product to customers. C. Receipt of a plaque recognizing the firm's encouragement of employee participation in the United Way fund drive. D. Receipt of services from a "quick-print" shop in exchange for the promise to provide advertising design services of equivalent value.` The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is: Answer A. A. consistency. B. matching revenue and expense. C. original cost. D. objectivity Accounts receivable are reported at: Answer A. Net realizable value. B. Historical cost. C. Weighted average cost. D. Market value The income statement shows amounts for: Answer A. revenues, expenses, losses, and liabilities. B. revenues, expenses, gains, and market value per share. C. revenues, assets, gains, and losses...
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...calculations. (The use of Microsoft® Excel® software is required.) 21.1 Contemporary Wood Furniture Case Study 21-1, p. 768 Charles Royston was checking the year-end balances for his wood furniture manufacturing and retail business and was concerned about the numbers. From what he remembered, his debts and accounts receivable were higher than the previous year. Rather than get worked up over nothing, he decided he would gather the information and make a comparison. For December 31, 2011, the business had current assets of: $1,844 cash, $11,807 accounts receivable, and $9,628 inventory. Plant and equipment totaled $158,700. Current liabilities were: accounts payable $13,446; wages payable $650; and property and taxes payable $4,124. Long-term debt totaled $92,800 and owner’s equity $70,959. By comparison, for December 31, 2010, the business had current assets of: $3,278 cash; $6,954 accounts receivable; $17,417 inventory. Plant and equipment totaled $144,500. Current liabilities were: accounts payable $9,250; wages payable $1,110; property and taxes payable $3,650. Long-term debt totaled $75,800; and owner’s equity $82,339. 1. Construct a comparative balance sheet for Contemporary Wood Furniture for year-end 2010 and 2011, including a vertical and horizontal analysis of the comparative balance sheet. Express percents to the nearest tenth of...
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