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
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