Current assets, classification and reflection in the balance sheet

The term "current assets" is put into circulation by the International Accounting Standards Committee and is assigned as such a standard in IAS - a document that contains a statement of principles and procedures for standard accounting.

As stated in this document, an asset is a resource that is acquired by an enterprise or a company in the course of a past activity and from which it is expected to receive profit in the future. Proceeding from the fact that the definition itself refers to the time parameter, they differentiate assets according to the terms from the possible useful use. For this reason, assets are distinguished:

- long-term (those with a useful life of one year or more);

- current assets (those with a given term of less than one year).

In addition, international standards also establish the rules under which it is necessary to classify assets. So, these rules apply to current assets:

- planned to use within the operational cycle;

- intended for use solely for commercial purposes;

- assets planned for sale within one year;

- those that are presented in cash.

All others must be related to long-term assets.

In accounting, current assets include the following items:

- All goods and materials without exception;

- future expenses to be written off in the future during the reporting period;

- cash;

- short-term investments;

- advance payments for the acquisition of the assets themselves;

- current accounts ;

- short-term bills of exchange;

- short-term receivables.

As a rule, current assets in accounting are reflected in the order of decreasing their liquidity. This sequence is as follows: cash, investments, accounts receivable (DZ), TMZ and advance payments. In addition, according to IAS, various types of current assets are differently reflected in the balance sheet.

Cash - at nominal value, the reflection of short-term investments occurs either at their market value, or at a lower level, from indicators that take profitability and market value. The amount of expected profit is estimated by the DZ, while the TMZ and advance payments are at cost.

All assets of the enterprise or company are involved in the turnover, which characterizes not only market activity, but also economic efficiency. Complex indicators are used for its evaluation, one of which is the indicator of the movement of current assets. In this sense, the current assets turnover is a set of special coefficients that show the effectiveness of using each of the types and in a specific financial process. For example, accounts receivable are reflected and tested with the help of its turnover ratio. The coefficient of turnover of TMZ shows the number of sales of the average stock of goods and services for a certain period. The security of the enterprise TMZ is reflected by the corresponding security ratio, which shows either the excess of these resources or their shortage during the period under review. Very important is the coefficient reflecting the share of each type of assets in the total current assets of the enterprise. Its role is especially great when planning the development of an enterprise and determining the strategy of commercial activity.

When conducting a comparative analysis of financial statements , the indicator is also used, as the current assets are correlated with the value of all investments attracted by this company for the period of annual turnover. As a rule, enterprises of industries with high capital intensity have low turnover figures, and wholesale firms are high.