Current Asset

These are the assets we required to perform the day to day activities of the business. We need to purchase raw-material, apply them in work in progress, and make it finished products to sell it to the debtors. Some raw materials are always lying in our Godown, some raw-materials are always in the process of making- we call it as work-in-progress, some finished products are always in our Godown at any point of time in a year.  The aggregate of Raw-material, work-in-progress, and Finished Goods are called Inventories. Apart from inventory, there are also some amount of money that always remains blocked on the parties to whom we sold our finished goods, we call them as Debtors/Trade Receivables. It is like interest free loan given to customers so it’s our indirect loss to have more amounts in debtors. Some amount of cash and treasury bills, marketable securities are always there in our Bank or with us, we call it as Cash and Cash Equivalents.

Apart from that we sometimes, give short loans to other companies or give advances to our suppliers we put these amounts in the category of Loans and Advances.

And the interest on the above loans and advances are kept under the head ‘other Current Assets’

The aggregates of Inventories, Trade Receivables; Cash and cash equivalents, loans and advances; and Other Current Assets are called Current Assets. These are the assets that can be converted into cash within 12 months.

One thing should be noted that it is not necessary to have all the items in current assets sometimes it may have one items or two or all.

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