Where are Current Assets Located on the Balance Sheet
Current assets are usually located at the top of the balance sheet under the “Assets” section and are typically the first category of assets displayed. They are assets that are expected to be converted into cash, sold, or consumed within a year or within the business’s normal operating cycle. The order in which current assets are listed often reflects their liquidity, starting with the most liquid assets like cash and cash equivalents.
Example of Where are Current Assets Located on the Balance Sheet
Certainly! Let’s consider a simplified example involving a small retail business, “GreenMart,” that sells organic food products. Here’s how the Current Assets section might appear on GreenMart’s balance sheet as of December 31, 2023.
As of December 31, 2023
Assets ------ Current Assets: <-- The Current Assets section starts here Cash: $20,000 Accounts Receivable: $8,000 Inventory: $12,000 Prepaid Rent: $2,000 -------- Total Current Assets: $42,000 <-- Total Current Assets summed up here Non-Current Assets: Property and Equipment: $60,000 Goodwill: $10,000 -------- Total Non-Current Assets: $70,000 -------- Total Assets: $112,000 <-- Sum of Current and Non-Current Assets Liabilities and Equity ----------------------- (Current and non-current liabilities and equity sections would follow)
In this example:
- Cash: This is the most liquid asset and represents the amount of cash GreenMart has on hand.
- Accounts Receivable: This represents the money that is owed to GreenMart by customers who have purchased goods but have not yet paid.
- Inventory: This is the value of goods that GreenMart has in stock and plans to sell.
- Prepaid Rent: This is an expense that has been paid in advance and will be consumed within the next 12 months.
The sum of all these individual current assets gives us the “Total Current Assets,” which is $42,000 in this case. This section provides a snapshot of the assets that GreenMart can quickly convert into cash or that will be used up within a year, making it an essential part of the company’s financial health assessment.