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Operating Current Assets

Pandiri Ramu (Business Analyst) (613 Points)

30 July 2010

Operating Current Assets includes building,machinary or only stock

please suggest with logic answer

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3 Replies

Faiz Ahmed ( Article Trainee) (1731 Points)
Replied 30 July 2010

Only stock is current asset as per your question.

Remember one logic to classify asset as current asset/ fixed asset.

When answer to all the question given below is NO in relation to asset, then its a Fixed Asset .::::

* Is the Asset held in cash or Bank Balance?

* Is it expected to be converted in cash?

* Is it expected to be used in production process or in rendering of services?

So, in case of Stock, its Current Asset because answers to above questions are not NO in all cases. To conclude, current Asset is the one which is held in the business for carrying out day to day production process and it loses its exact nature very quickly(may be within a year)

work is worship (Service) (2728 Points)
Replied 31 July 2010

Hi Fiaz is correct,

In your above question only stock will be considered as current assets, building and machinery are fixed assets as they are in business for a longer time and there nature is such that they are not quickly convereted into cash/ finished goods within a year though they are used in generating sales/income for a concern.

Current assets normally includes Inventory, Cash and Bank,accounts receivable and trading securites. Current assets are called current because they change their form frequently, typically many times within a year. These assets are continually flowing into and out of the business, and are essential for day-to-day operations

Operating Current assets includes Inventory, Cash and Bank, and Receivables.