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current assets Definition

Budget

The budget is one of the accounting financial statements that estimates costs, revenues, and resources during a specific period of time. It reflects a clear reading of future financial conditions and goals. It is one of the most important administrative and accounting tools. It is used as a plan of action at the beginning of the fiscal year, in order to ensure that quantitative goals are achieved. To measure the performance of the facility, and through it, it is possible to anticipate future negative situations for the facility to notice and try to deal with them. The budget consists of assets, liabilities or property rights. The assets are divided into two parts, namely, current assets and fixed assets.

current assets Definition

It is an essential element in the balance sheet of any of the financial institutions or institutions, and it is represented in the form of cash or its equivalent. It is the asset that can be converted into cash within one financial year or during the budget period, and if the facility has a balance sheet period that lasts more than a year, the asset is still It is classified from current assets as long as it can be converted into cash during the operating cycle, and the most important examples of it are cash in the treasury, including foreign currencies, prepaid expenses, receivables and inventory. Current assets refer to current liabilities because they indicate the availability of short-term liquidity with the facility. The more current assets exceed liabilities, the more the company will be able to meet its obligations.
current assets Definition
current assets Definition

Examples of current assets on the balance sheet

Current assets are of great importance to the financial institution, through them you finance daily business operations and pay operating expenses. It also reflects the strength of the company's financial position. The most important examples of current assets are:
  • Accounts receivable: Accounts receivable or what is known as accounts receivable express the money owed to the company from customers who benefit from services or goods provided to them and have not been paid, and the receivable is a current asset because it is expected to be paid during the budget period, but if the company provides credit terms with A longer period of time to repay its customers, so it is not included under current assets.
  • Inventory: Inventory is the raw materials, components, and finished products that are available for sale. Therefore, it is considered a current asset because it is intended to be sold during the fiscal year and to provide the necessary liquidity to ensure the survival of the facility's activity.
  • Prepaid Payments: Prepaid payments are payments made by project owners to a company for goods and services to be received in the future, and although they are not intended to be converted into cash, they are a component of capital.
  • Short-term investments: They are those investments with a period of time starting from three months and up to a full year, which helps to provide security in the financial entity for the ease of converting it into cash. Among the most important examples of these are securities, certificates of deposit and treasury bonds.
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