Current (current) and non-current assets - two groups of assets of the organization, sections of the balance sheet. What is included in these concepts and how do they differ from each other?
Concept and types of current assets
Current assets are those that are used simultaneously when they are released into production. Current assets include, in particular, stocks, raw materials, semi-finished products, VAT on purchased goods, short-term receivables (up to a year), financial investments, money, etc.
The presence of a sufficient volume of circulating assets is necessary for the normal financial activity of the enterprise, this is both raw materials for production, and money for settlements with suppliers.
Concept and types of non-current assets
Non-current assets are those with a life of more than 12 months. Non-current assets include intangible assets, R&D results, fixed assets (buildings, machines, structures), investments in tangible assets and financial investments (with a long period of return), deferred tax assets and other assets.
Differences between current and non-current assets
The first difference between current and non-current assets is their maturity. For circulating ones, as a rule, it is 12 months (for most enterprises, the year is the operating cycle), for non-circulating ones - more than a year.
However, this division is very arbitrary. The maturity date of an asset does not always serve as a basis for classifying an asset as current. An important role in this case is played by the liquidity of the asset. For example, a receivable with a maturity of more than one year is usually a non-current asset, but if an entity can sell it before that maturity, it can be considered a current asset. Thus, non-current assets are characterized by less liquidity than current ones. It is more difficult to sell them, turning them into money, and part of the circulating assets - money, have absolute liquidity.
Another distinguishing feature of non-current assets is that this part of the enterprise has been functioning unchanged for a long time. They transfer the value of the manufactured products in parts, while the circulating ones - in full.
A high share of circulating assets is distinguished by material-intensive production and trade organizations, while capital-intensive companies (for example, telecommunications) are characterized by a low share.
It is easier for companies with a predominance of current assets to attract short-term loans. Whereas non-current assets require long-term investments and the source of their purchase - as a rule, are own funds.
