Assets are the most important part of the business, without assets no one even thinks to start a business.
Assets are the main thing which generates revenue and this revenue increase profit and results in the growth of the business from low to high level.
Hence, in the business world, it is very important to understand assets and its different types to differentiate clearly among them
Assets
First of all, it is very important to understand what the assets are. Assets are the items of values in the business which generate revenue and increase the profit of the business. Assets are located on the balance sheet of the company.
The balance sheet consists of all types of assets whether the company has its own assets, equity or debt. Both short and long term assets are located on the balance sheet.
Current Assets
The current Asset is the part of assets that are used in a short period of time. Current assets can easily convert into cash within one year.
Current assets are also important for the company as much as the other assets are important. There are some differences in the assets and the current assets which explain are as under.
Assets Vs Currents assets
- Current Assets are the part of assets
Assets have many parts but the most important is the fixed and current assets. Current assets are the most important part of the assets and without current assets, a business cannot run. Current assets are always used to operate day to day business activates.
- Period of time
Time and money are important everywhere, but their importance is more in the business world. Some items are used in a short period of time and the other is used in a long period of time. Current assets are used in a short period of time it is maximum a year while fixed assets are used for a long period of time minimum for more than a year.
- Use of the current and Fixed assets
Current and fixed assets differ by their use. Fixed assets are used for more than a year and for a long time like machinery, building and furniture are used for a long time. While current assets are the cash and easily converted into cash which is used for the short period of time
- Depreciation
Assets are depreciated on annual basis and these are the fixed assets that are depreciated on the annual basis, while current assets are not deprecated because of the short period of time and they are easily converted into cash, maximum in a year. So deprecation is not part of the current assets.
- Nontangible assets
Assets have both tangible and non- tangibles. Tangibles assists are those assets that are touchable and seeable like land, building, machinery, etc. while nontangible assets are those assets that cannot touch like brand and trademark. Hence, current assets are only those assets that are tangible and easily converted into cash within a year.
- Value of assets and current assets in the business
Value of the assets and especially the fixed assets are more, in the term of money, as compare to the current assets. It does not mean that current assets have low value. Current assets are also valuable in the term of money but not as much as the fixed assets are valuable.
Conclusion
Current assets are the part of assets that can easily be converted into cash within a year and also work in day to day business life.
