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Current Assets

These assets consists of cash and other assets such as debtors, bill receivable, stock of goods (inventories), raw material, prepaid expenses etc. that are reasonably expected to be converted into cash or be sold or be consumed within one year from the balance sheet date or during the normal operating period whichever is longer. The debtors and bills receivable are expected to be realized in cash. The stock of goods (inventories) is expected to be sold either for cash or on credit (to debtors), to be converted into cash. The raw materials or office supplies like stationery to be consumed. This feature of the current assets has attracted other names for them as well such as floating assets or circulating assets which are continually being turned over. For example in the course of business transaction cash is used to purchase goods for resale; goods are then sold for cash or on credit in the form of debtors and bills receivable which are again realized in cash and cash is again used to purchase goods and this cycle repeats again and again in he accounting period. Whether a particular item is a current asset or not would depend upon the nature of the business or the purpose for which it is acquired.

Liquid assets and non-liquid assets: Current assets are again sub-dividing into these two categories.

Liquid Assets are in the form of cash in hand and at bank and other current assets which can be converted into cash in hand and at bank and other current assets which can be converted into cash without much loss such as Government Securities, bill receivable, debtors etc..

Non-liquid assets can not be readily converted into cash and also not without much loss such as inventories.

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