Skip to main content

Current asset

A current asset is one a business expects to turn into cash, sell, or use up within its operating cycle or twelve months — cash, receivables and inventory are the standard examples classified this way under IAS 1.

ByHoang TruongUpdated

FrameworkIAS 1

See it move

Loading infographic...

A retailer's year-end balances include cash of €3,000, trade receivables of €5,500, inventory of €7,200, and a prepaid insurance premium of €800 covering the next six months. All four count as current under IAS 1 because each will be realised, sold or consumed within twelve months, giving total current assets of €16,500.

Where it fits
SubjectFinancial AccountingCoreTopicThe Accounting Equation & Its ElementsCoreTopicThe Financial StatementsCore

The formula

LaTeX
CA=Ca+R+I+PpCA = Ca + R + I + Pp

Variables

Total current assets ()
Cash and cash equivalents ()
Trade receivables ()
Inventory ()
Prepayments ()

Sums the standard current-asset line items to the total current assets reported on the balance sheet.

Check yourself

PracticeCORE

A company's year-end balance sheet shows: cash €2,100, trade receivables €6,400, inventory €9,800, a prepayment of €500 for next year's rates, and an investment property held for long-term rental income of €120,000. Current liabilities total €12,900. What is the company's current ratio (current assets ÷ current liabilities), to two decimal places?

Select an answer to check your understanding.