Current and Noncurrent Assets

CURRENT and NONCURRENT ASSETS

Seneca Porter

University of Phoenix

ACC/400

Theresa Pekron

October 13, 2014

Current and Noncurrent assets are commonly known within the accounting environment, especially for non-accounting individuals. In our everyday lives the things we utilize is an asset to someone, hence those expenditures typically will appear on a balance sheet as an

indicator of how much money (cash) is being consumed. So, what are current assets? Current assets are a short-term asset. It is cash as well as any other company asset that can eventually turn into cash within 12 months from the date presented on the balance sheet, because we know that CASH IS KING. If an organization has an operating cycle that is longer than 12 months, that particular asset that will turn to cash within the length of its operating cycle, only then can it be a current asset.

As stated, all current assets are at the beginning of the balance sheet and are usually presented in the order of liquidity. When it comes to short -term assets or cash this involves currency, checking accounts, petty cash, temporary investments, accounts receivable, inventory, supplies and prepaid expenses. For example, I make purchases within the Humanities Department at Harold Washington College; we have two operating budgets, one for equipment and office supplies and the other for contractual purposes. It is my job to track where the cash goes and how much of it we spent throughout the fiscal year. Our expenditures are then inputted in what we call a "Budget Analysis" for tracking.

In reference to ( accountingcoach.com), It is important not to exaggerate current asset, for example, accounts receivable, inventories, and temporary investment should have valuation account, meaning, an organization should not document higher expenditures that are expected when that asset is converted into cash. This is vital because the amount of the company's working capital and its current ratio are calculated using the current assets reported amounts.

What are noncurrent assets? Noncurrent assets are the alternative to current assets. The major kinds of noncurrent assets are:

Property, Plant and Equipment

Intangible Assets

Long-term investments

There are alternate terms accountants use to refer to noncurrent assets, for example fixed assets, long-term assets, and long-lived assets all fall under the same umbrella as noncurrent assets. According to the site (accountingexplained.com) Property, Plant and Equipment are noncurrent assets because they have some physical existence, also, it can be called "Tangible Fixed Assets" which are can be grouped in different classes such as land, land improvement, building, vehicles, etc.. For example, if I order pianos for our music program it will fall under the category of equipment which would be a noncurrent asset. Conversely, assets that have no physical existence such as patents, copyrights, and goodwill are considered "Intangible Assets"

Long-term investments are investments which are not recognized in the 12 month period, for example, Porter Ltd. procured a 10 year bonds of Douglas Ltd. worth 7 million back in Jan.1, 2012. Since the bonds will be paid back in 10 years, they are noncurrent on the date of Dec. 31, 2012, thus, will appear under long-term investments.

The difference between current and noncurrent assets is simply current assets are short-term assets and noncurrent assets are long-term assets. The main difference between the two is how rapidly the asset can be liquidated or better sold for cash. When it comes to the order of liquidity, this is basically for formation of the balance sheet, and order of the time allotted it would take to convert those items into cash. Cash is always first on the balance sheet, followed by marketable securities, next would be inventory and fixed assets, and last is goodwill (simplestudies.com). As stated, time is imperative when