Current Asset – Meaning and Explanation with Examples



Those assets which are used or utilized within the period of one year are known as Current Asset. These are also known as short term assets.


In other words, Those assets which are very easily convertible into cash or which are already available in the liquid form are known as Current Asset. 

Examples of Current Assets: –

  • Cash or Cash Equivalents
    • Cash in Hand 
    • Cash at Bank 
  • Inventories
    • Raw Materials 
    • Work in Progress 
    • Finished Goods 
  • Receivables
    • Sundry Debtors 
    • Bills Receivables 
  • Pre-Paid Expenses
  • Marketable Securities 
  • Accrued Incomes
  • Short Term Loans and Advances 
    • Advance to Employees 
    • Advance to Vendors
  • Other Liquid Assets

Importance of Current Asset: –

Current Assets are very important to the business because these are used in the day to day operation of the business. With cash and bank, we can pay our day to day petty expenses. So, every business must have an adequate amount of cash to run a business smoothly. 

Placement of a Current asset in the balance sheet: –

The placement of a current asset in the balance sheet will be shown under the group head Current Assets. These are shown in the following format of the balance sheet and highlighted with orange colour: –


Name of the Entity
Balance Sheet as on 31st March, _______
Liabilities AmountAssets Amount 
Current Liabilities  Current Assets  
Trade Creditors  Cash in hand  
Bills Payable  Cash at Bank 
Outstanding Expenses  Inventories  
Advance/Unearned Incomes Bills payable  
Short term loans  Sundry Debtors  
Non-Current Liabilities  Prepaid Expenses  
long terms loans  Accrued Incomes  
Debentures  Fixed/Non-Current Assets 
Capital Building  
Add:  Net profit  Land  
   interest on Capital
 Plant & machine  
Less:  Drawings  Furniture & fixture  
   Net Loss  Goodwill  

The balance sheet can be prepared on two basis

  • First is based on Liquidity 
  • Second is based on Permanence 

and in two different types of format 

  • Horizontal
  • Vertical

To know more about them please check out our article on The balance sheet by clicking on the following link: –

Balance Sheet: Meaning, Format & Examples


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