While analyzing a balance sheet of a company it is of paramount importance that you have an idea about current assets and current liabilities. Current assets are those assets which can be easily converted into cash within 12 months, given below are some of the examples of current assets –
- Cash balance available with company
- Inventories which includes raw materials, work in progress and finished goods.
- Bank balance of the company
- Sundry Debtors of the company (in the balance sheet sundry debtors are shown after deducting provision for bad debts).
- Bills receivables or accounts receivables
- Prepaid expenses
- Short term investments like bonds, money market bills, mutual funds and stocks which are expected to be sold in less than a year.
Current liabilities are those liabilities which are due for the payment within a short period of time usually 12 months, given below are some of the examples of current liabilities –
- Sundry Creditors
- Bills Payable or Account Payable
- Outstanding or Accrued Expenses like salary outstanding, rent outstanding etc…
- Unearned Income
- Short Term Loans
- Bank loan, which is due within a year
- Interest, tax and Dividend Payment