Non-Current Assets and Current Assets
In our previous post, we have discussed about the Presentation of Financial Statements of a Company. If you havn’t read it yet, read it here. Now, we will study all the major components/items of Balance sheet in detail one by one. So, in continuation of that, In this post we are going to discuss about Non-Current Assets and Current Assets. So, let’s understand it.
As it is a first line item of Balance sheet as per schedule III, Division II, discussed in our previous post. Take a look how these Assets are presented in Balance sheet. Given below is the extract of Standalone Financial Statement.
Assets are important players in the accounting game. They are the items that are owned and controlled by either an individual or an organization. Assets are divided into 2 main categories:
Current assets are the ones that will have their full value realized within 12 months of the balance sheet date.
Often called long-term assets, non-current assets are those that will not have their full value realized within 12 months of the balance sheet date.
What does ‘having their value realized’ mean?
Quite simply, that means that the asset is converted into actual cash that will be used to meet debt obligations.
The above meaning is quite simple to understand by following examples: –
Examples of Non-current Asset:
1. Fixed Assets:
The items that would be reported here are such things as the building that houses a business, the equipment used in business operations, and the land that property is located on.
2. Long-term Investments:
Long-term investments are investments that will not be turned into cash within 12 months. Examples of long-term investments are stock, bond, and real estate purchases.
3. Intangible Assets:
Intangible assets are those assets that cannot be physically touched but have value. For example, a trade name is an intangible asset. Other examples of intangible assets are copyrights, patents, brand names, trade secrets, and licensing agreements.
There are many examples of Non-current assets that can be seen in Balance sheet. We will discuss each and every item under Non-current assets in detail later.
Examples of Current Assets:
Inventory is the raw materials, work-in-process products and finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale. Inventory represents one of the most important assets of a business because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders. Accounting Standard (AS)-2 and Ind AS-2 deals with the treatment of Inventory in Accountancy.
2. Trade Receivable:
It is the total amount receivable to a business for sale of goods or services provided as a part of their business operations. Trade receivables consist of Debtors and Bills Receivables.
“Trade Receivables = Debtors + Bills Receivables”
There are many examples of current assets that can be seen in Balance sheet. We will discuss each and every item Current assets in detail later according to Global Accounting standards.
Reporting Of Non-Current Assets and Current Assets:
Indian Accounting Standards and Schedule III of Companies Act 2013 set the standard for the manner in which assets, liabilities, and owner’s equity are reported on the financial statements of a company. On seeing the format of Balance sheet given by Schedule III of Companies Act 2013, Non-Current Assets is a first line item followed by Current Assets.
Further details of each and every term under Non Current Assets and Current Assets as per accounting standards will be in separate posts
-Geetika Goyal (Team Member)
Non-Current Assets and Current Assets