The term "current assets" is put into circulationInternational 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, the asset representsa resource that is acquired by an enterprise or a company in the course of past activities and from which it is expected to receive profit in the future. Based on the fact that the definition itself refers to the time parameter, they differentiate the 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;
- 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 reflectedin order to reduce 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 face value,the reflection of short-term investments occurs either at their market value, or on a smaller basis, from the indicators, in which the profitability and market value are taken. The amount of expected profit is estimated by the DZ, while the TMZ and down payments are at cost.
All assets of the enterprise or company participate in theturnover, 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 particular financial process. For example, receivables are reflected and tested using the 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 in 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 financialThe report also uses the indicator how current assets correspond to the value of all investments attracted by this company during the period of annual turnover. As a rule, enterprises of industries with high capital intensity have low turnover figures, and wholesale firms are high.