Difference between Current and Non-Current Assets

Rancakmedia.com – For those of you who are still confused about the difference between current and non-current assets, you can easily find out in the articles we provide below.

Assets are anything that is owned by a company that is valuable and deserves to be owned. Assets or more commonly referred to as assets in the field of accounting is one of the main components in a financial report. Because the wealth of a company can be seen from its current assets and short-term assets, which are reflected in its financial statements,

There are two types of assets, which are called current and non-current assets. Both of these assets have real value to a company. This is because a company is said to be growing if it has assets that continue to increase every year.

In the annual balance sheet, company assets are an important topic for investors, creditors and analysts. According to some analysts, investing in a growing company is an indication that a company's assets are worth its money.

If a company is unable to pay its obligations, the value of its assets becomes collateral for its creditors. Then the guarantee can be used as a way to pay off the company's debts. The job of the economic analyst is to provide an unbiased view for the general population to use in investing.

Definition of Assets in General

Asset roughly can be described as all the assets owned by the company. It can be anything that can be measured in monetary units, whether it be money, products, structures or whatever.

The company's value may increase or decrease as a result of the previous transactions that made up its wealth. Assets are often used as capital in running a company. In the real world, these assets are often equated with monetary money. However, in reality, anything used in a business is an asset.

Definition of Assets in General

For example, a company that provides advertising services may. In plain view, capital in the form of money deposited in a bank is a company asset. However, if you pay close attention, buildings, company vehicles, and even company computers are assets.

However, assets in the form of goods whose economic value may decrease at any time. Meanwhile, the money kept in the bank does not reduce its economic value. Liquid and non-liquid assets are the two current categories of assets in today's world.

Liquidity is the ability of an asset to be used within a certain period of time. If an asset can be converted into a certain currency in a fast enough period, then the liquidity is strong. The liquidity of an asset is poor if it takes a long time to convert it to cash (often more than one year).

About Current Assets

Current assets are company assets that are easily converted into cash. This form of asset can be measured with precision in units of monetary value. Usually, current assets are a vital component of the company in carrying out its company operations.

It is possible to liquidate company assets quickly and easily, which means low operating costs. Current assets often have four distinct characteristics. These characteristics are as follows:

  1. Easy to trade and use in less than 12 months.
  2. Saved so that it can be traded again.
  3. Relatively short disbursements, so they can be incurred within 12 months after the end of the balance sheet period.
    usually in the form of cash or cash.

There are various types of current assets. As long as it fulfills these 4 characteristics, the product is a current asset. Here are some examples of current assets:

Cash

In accounting, cash and bank are referred to as “cash” and “bank” respectively. Cash is used in company operations. Meanwhile, the money left in the account is called a "bank."

Cash and bank accounts can be used directly in accounting. There is a brief distribution procedure. For example, money in a savings account doesn't have to be withdrawn until the end of the month.

About Current Assets

Securities

Securities are letters issued by agencies as proof of ownership of a valuable item. The nature of these securities can be sold at any time, so they can quickly receive cash. The following are many examples of security, such as:

  1. Monthly Deposits
  2. Bond
  3. Share
  4. Bills receivable
  5. And other securities that are easy to trade

accounts receivable

Receivables are bills to clients who buy goods on credit. Usually, receivables are paid within a certain period. Both parties have agreed in advance to pay according to the agreed rate.

Supply

Inventory is the amount of goods that have not been sold and have economic value. So, if the goods are sold, the money from the sale can replenish the company's coffers.

Prepaid expenses

Prepaid expenses are current assets because payments are made in advance by the company, so they do not burden the company at the end of the period.

The company can continue its economic activities because the obligations that have been paid are paid off. Expenses such as insurance premiums, office supplies and interest can all be paid in advance.

Concerning Non-Current Assets

Current and non-current assets are very important for the company. A discussion of current term assets follows a discussion of current term assets.

In practice, non-current assets are assets that cannot be directly converted into cash. Most of the time, trading these assets takes a long time. Non-current assets cannot be measured in monetary terms, like current assets.

Non-current assets can be divided into three categories. Intangible investment and long-term are the other two assets of non-current assets, while fixed assets are the third. Each form of non-current assets will be explained as follows:

Concerning Non-Current Assets

Fixed assets

Corporate company assets are funded through fixed asset acquisitions. These are often measurable assets and their value in monetary units changes over time.

When a company undergoes a substantial change, such as growth, decline, or even bankruptcy, its fixed assets are often resold. Examples of fixed assets include buildings, company vehicles, equipment, land, and so on.

Intangible Assets

It is possible to feel the value of an intangible asset even if it is invisible to the naked eye. Privileges controlled by the company are more often used to describe these assets in everyday conversation, so that economic benefits can be appreciated.

The following are some examples of intangible assets:

  1. Copyright, the right granted by the government to an intellectual work created by an individual or company.
  2. Patents, rights granted by the government for inventions that benefit society.
  3. Trademark rights, rights granted by the government regarding the use of business names and symbols.
  4. Contract rights, rights granted by certain parties to other parties for a certain period of time in order to be able to use their assets.
  5. Franchise, rights obtained from an agreement between two parties related to the use of trademark names, business symbols, and special recipes for a product.
  6. Goodwill, the company's good values that give privileges to the company.

Long term investment

These investments can be in the form of fixed and variable assets that are incorporated into the economic operations of a company seeking to increase future business profits, for example, the purchase of government bonds, bonds, or the acquisition of shares of other companies.

Recognize the Difference between Current and Non-Current Assets

There are three variations between current and non-current assets, namely timeframe, purpose, and benefits. Three factors determine whether an asset is classified as current or non-current.

First, the timeline for turning it into cash. Current assets consist of assets that are simple and quick in less than 12 months to convert into cash by trading in certain markets. Meanwhile, non-fixed assets require more than 12 months to be exchanged.

Second, the purpose of acquiring these assets. To help the company's operations and cash flow, current assets can be obtained as savings and or as investments. In contrast to non-current assets, these assets are deliberately purchased to assist the manufacturing process.

Recognize the Difference between Current and Non-Current Assets

The advantage of buying these assets is the third point. Current assets are maintained as a form of direct payment in operations company. Fixed assets, on the other hand, are often used as collateral or as collateral when a business borrows money from a bank.

FAQs

Below we have summarized some frequently asked questions about assets, as follows:

Are Banks Included as Current Assets?

The bank balance is the current asset that most companies have, this asset can be used by the company at any time when the company needs funds to maintain company assets.

Conclusion

Assets can be in the form of money, products, structures, or whatever. Current assets are company assets that can easily be converted into cash in a relatively short time – usually less than 12 months. Cash and bank accounts can be used directly in accounting.

In practice, non-current assets are assets that cannot be directly converted into cash. Most of the time, trading these assets takes a long time. Non-current assets cannot be measured in monetary terms, like current assets.

Thus the article about the difference between current and non-current assets, I hope the information above can be useful and helpful for all of you.

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