Current Assets

All those assets which are capable of being liquidated within a reasonable period of time (typically a year or less) are considered to be current assets. Since Liquid Assets can also be liquidated within this time span, they also form part of Current Assets.

Thus
    Current Assets = Liquid Assets + Current Assets other than Liquid Assets.

Cash balance, Bank balance, Bills Receivable, Sundry debtors, Recoverable Advances, etc., which are all liquid assets along with other current assets like Stocks/Inventories, Prepaid expenses, Incomes receivable etc., form some examples for current assets.

The following other Current Assets require special attention

Prepaid Expenses

Prepaid expenses which are not recoverable in cash but are capable of being set off as expenses in the future, are made part of current assets other than liquid assets.

Stock/Inventories

Stocks/Inventories generally form a significant portion of other current assets. In the absence of any other information, we assume that current assets other than liquid assets are made up of stocks/inventories.

Current Assets - Liquid Assets = Stock/Inventories

Current Assets = Liquid Assets + Current Assets other than Liquid Assets.
= Liquid Assets + Stock/Inventories.

⇒ Stock/Inventories = Current Assets - Liquid Assets

This relationship is useful in problem solving.

Current Assets = Liquid Assets

In the absence of current assets other than liquid assets, current assets should be equal to liquid assets.

Current Assets = Liquid Assets + Current Assets other than Liquid Assets.
= Liquid Assets + 0
= Liquid Assets

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