Question

Explain Current Asset & Current Liabilities.

Answer 1

Current assets : are expected to be consumed, sold, or converted into cash either in one year or in the operating cycle, whichever is longer. An operating cycle is an average time it takes to convert an investment in inventory back into cash. Current assets are presented in order of liquidity.

Current liabilities : are a company's debts or obligations that are due within one year or within a normal operating cycle. Furthermore, current liabilities are settled by the use of a current asset, such as cash, or by creating a new current liability. Current liabilities appear on a company's balance sheet and include short-term debt, accounts payable, accrued liabilities, and other similar debts.