Difference between Current Assets and Current Liabilities

Difference between Current Assets and Current Liabilities

The major difference in both terms is on the basis of nature. The assets are those things that will provide benefits in the future but liabilities are those things, which the business has to pay in the future. To know the more difference between Current and Current Liabilities, we have to know the meaning of both terms. So, the meaning of both terms are explained below: –

Meaning of Current Assets: –

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. 

Examples: –

  • 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

To know more in the detail, please check out the following link:

Current Asset – Meaning and Explanation with Examples

Meaning of Current Liabilities: –

Current liabilities are a type of loan that must be repaid within one year (maximum 1 year). These loans are better known as short-term liabilities. This type of liabilities is taken to achieve the smooth operation of the business. In simple words, they fulfill the working capital requirement of the business.

Current liabilities appear in favor of liabilities in the balance sheet. The following accounts are shown in this group of balance sheets: –

  1. Sundry Creditor/Trade Payables
  2. Bills Payables 
  3. Short Term Loans
    • From Banks
    • From Financial Institution
    • From Partners or investors
  4. Outstanding Expenses
  5. Pre received Income
  6. Dividend Payable to Shareholder
  7. Taxes & Duties Payable 

To know more in the detail, please check out the following link:

What are Current liabilities – Explained with Examples

Chart of Difference between Current Assets and Current Liabilities: –

Basis of Difference

Current Assets

Current Liabilities

Meaning

Those assets which are used or utilized within the period of one year. Current liabilities are a type of loan that must be repaid within one year (maximum 1 year).

Also known as 

These are also known as Short Term Assets. These are also known as Short Term Liabilities.

Part off 

These assets are a part of Total assets.  These Liabilities are a part of Total Liabilities. 
Financial Statement These assets are shown separately on the right side of the Balance sheet. These Liabilities are shown separately on the left side of the Balance sheet.

Need for Calculation 

These are calculated to know the ability of the business of liquidity. These are calculated to know the current total outstanding amount which business has to pay in the future. 

Examples 

These assets have included cash, bank balance, sundry debtors, inventory, or prepaid expenses.  These liabilities have included short terms loans, Sundry Creditors & Outstanding expenses.  

Download the chart: –

If you want to download the chart please download the following image and PDF file:-

Chart of Difference between Current Assets and Current Liabilities 300x281 - Difference between Current Assets and Current Liabilities
Chart of Difference between Current Assets and Current Liabilities

 

 

application pdf - Difference between Current Assets and Current Liabilities
Chart of Difference between Current Assets and Current Liabilities

 

The conclusion of Difference: –

The major difference in both terms is on the basis of nature. The current assets are those things that will provide us with the benefits in the future by making the availability of cash in the business. but liabilities are those things, which the business has to pay in the future. 

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T.S. Grewals Double Entry Book Keeping - Difference between Current Assets and Current Liabilities

T.S. Grewal’s Double Entry Book Keeping