Andreea BoscaFinance at Klipfolio
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Current assets reflect a company’s assets on the Balance Sheet or Statement of Financial Position and are easily liquidated or converted to cash within one year. Companies often use current assets in conjunction with current liabilities to calculate different liquidity ratios. Some common accounts that fall under current assets are cash and cash equivalents, accounts receivable, prepaid expenses, trade receivable, and many others depending on industry.
Current liabilities reflect a company’s short term debt on the Balance Sheet or Statement of Financial Position. This debt is short term and must be paid within a year. It's important for a company to identify current liabilities in order to understand their financial solvency, often this is done in conjunction with current assets. Some common accounts that fall under current liabilities are accounts payable, deferred revenue, interest payable, short-term debt, dividend payable, and many others depending on industry.
Accounts Payable can be found on a company’s Balance Sheet or Statement of Financial Position as part of current liabilities. This account reflects short term obligations the company has to its suppliers for purchased goods and services on credit.
Accounts Receivable can be found on the Balance Sheet or Statement of Financial Position as part of current assets. This account reflects customer accounts that the company has invoiced for goods and services delivered. The amount is expected to be received based on the payment terms stated on the invoice within a year.