Difference between Current and Liquid Assets

Difference between Current Assets and Liquid Assets

The major difference in both terms is on the basis of the ability to liquidate. To know the more difference between Current and Liquid Assets, 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 the details, please check out the following link:

Current Asset – Meaning and Explanation with Examples

Meaning of Liquid Assets: –

The Liquid assets are those assets which can be converted into cash in very less period of time i.e. in a few days. These are included in the current assets and not shown separately in the financial statements. These are calculated to calculate the ratio for future prediction. These include all cash and cash equivalents. 

Formula to calculate: –

Liquid Assets =  Current Assets – Inventories – Prepaid Expenses 

Examples are as follows: –

  • Cash in hand
  • Bank Balance 
  • Marketable Securities 
  • Account Receivable

Chart of Difference between Current Assets and Liquid Assets: –

Basis of Difference

Current Assets

Liquid Assets

Meaning

Those assets which are used or utilized within the period of one year. Those assets which can be converted into cash in very less period of time i.e. in a few days.

Also known as 

These are also known as Short Term Assets. These are also known as quick assets.

Part off 

These assets are a part of Total assets.  These assets are part of Current assets. 
Financial Statement These assets are shown separately in the financial statement. These assets are not shown separately in the financial statement.

Need for Calculation 

These are calculated to measure the working capital requirement of the business. These are calculated to measure the liquidity ratio of the business. 

Inventory or prepaid Expenses

These assets have included inventory or prepaid expenses.  These assets have not included inventory or prepaid 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 Liquid Assets 300x275 - Difference between Current and Liquid Assets

 

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

 

The conclusion of Difference: –

The major difference in both terms is on the basis of the ability to liquidate.  the Other Current assets(other than liquid assets) can be liquidated faster then Fixed assets but liquid assets can be liquidated faster than current assets. 

Thanks for reading the topic

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

T.S. Grewal’s Double Entry Book Keeping

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