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Current Liabilities and Current Assets

Current Liabilities

 

Current liabilities are liabilities to the company that may expect to pay within one year from the reporting date. These current liabilities will appear on the company’s balance sheet.

 

Current liabilities are used to find the company’s working capital, the formula is current assets minus current liabilities.

 

 

 

 

 

Examples of current liabilities

 

Accounts payable

 

Interest payable

 

Salaries payable

 

Short term loans

 

Income tax payable

 

Payroll tax payable

 

Other accrued expenses

 

 

The above mentioned liabilities classified as a current liabilities, because they have to pay within the short period of time.

 

 

Current Assets

 

Current assets are balance sheet accounts that will be converted into cash within one year. Current assets include cash, short term investments, accounts receivable and prepaid expenses.

 

 

Example of current assets

 

Cash account

 

Accounts receivable

 

Inventory

 

Prepaid expenses

 

 

The current ratio is calculated by using the below formula:

 

Total current assets dividing by total current liabilities

 

 

Non – Current Assets

 

These assets are other than current assets, these assets to be converted into cash within the short period (less than 12 months) and also non-current assets referred to as a long term assets.

 

 

Example of non-current assets

 

Long term investments

 

Intangible assets

 

Property, plant & equipment

 

Long term notes receivable

 

Long term deposits

 

 

Non-current assets include the life insurance, investments, land, buildings, equipment, vehicles, goodwill and trademarks.

 

 

 

 

Related Topics

 

Accounting Basics

 

Prepaid Expenses

 

Adjusting Entries

 

 

 

Related Pages

  • Fixed Asset Entries
  • Payroll Journal Entries
  • Accrued Expenses
  • Prepaid Income
  • Accounting Basics
  • Debits and Credits
  • Chart of Accounts
  • Bookkeeping
  • Petty Cash
  • Bank Reconciliation
  • Accounts Payable Process
  • Accounts Receivable Process
  • Prepaid Expenses
  • Discount Allowed and Discount Received
  • Journal Entries
  • Adjusting Entries
  • Depreciation
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