In accounting, a list of current assets is a list of all assets that are owned by a company and have not yet been utilized or are unlikely to be used during the course of the year. In tax planning, a list of current assets is used to calculate the amount of the gross value of the company’s assets and liabilities at the end of the year and for tax planning purposes.
The type of assets a company has is important in determining the amount it will be entitled to as a deduction or benefit under the laws of various countries. An important consideration is the type of investment used to acquire the assets of the company. A company can use cash, property, machinery, and intangible assets. The most common and useful asset types are property, equipment, inventory, and goodwill. The following are some general considerations that must be made when creating a list of current assets.
Current assets are an important asset category, but they do not necessarily include the total of all current liabilities of the company. A company’s cash balance accounts for the most amount of cash in the business at the end of the year and is therefore a significant determinant of current assets. It is important to determine the percentage of cash available for investment in the business. This percentage is usually called net worth.
Other items on a list of current assets include accounts receivable, accounts payable, accounts receivable, prepaid expenses, current investments, and current tangible assets. The amount of cash equivalents held by the business also affects the amount of the company’s current assets. This category includes money market funds, bank accounts, investment securities, government bonds, and stocks.
The next category, tangible assets, includes inventory, vehicles, buildings, and other non-intangible assets that have definite uses. Examples of tangible assets include furniture, machinery, tools, patents, supplies, machines, and raw materials. Inventory accounts for the value of the goods and services that the company purchases in its regular operations. Assets such as office supplies, machinery, and computers may be depreciated over time. Buildings and land accounts for the cost of new construction and repair expenses that are not amortized over time.
Intangible assets include licenses and patents. These include the rights to manufacture, produce, sell, or distribute products or information. They also include rights granted to third parties for the right to use particular forms of technology.
The cost of current assets should be determined based on its fair value using several different methods. These methods include selling, purchasing, determining market value, and cost method.
When creating a list of current assets, the following steps should be taken: determining the amount and type of assets to include, listing the current and long term liabilities, calculating a discount rate, determining an appropriate level of net worth for the business, and preparing a statement of earnings and/or income. List building or maintaining the list of assets and a current asset’s list is one way to maintain consistency between financial records.
The first step in creating a list is to identify the amount and types of assets to list. Allocating a dollar amount is based upon an estimate of the expected value of these assets. The inventory value will need to be determined, with the most recent inventory value being used for the determination of the inventory level and the discount rate.
The next step in preparing a current asset’s list is to list the current and long-term liabilities and the current and future debt requirements for each of the assets that are being considered. This includes consideration of the value of any fixed assets and liabilities. Other assets that are being listed include the estimated future sales, expenses for production and marketing, possible capital investments, and future purchases, and returns of interest, and tax, and lease obligations.
The current and long-term debts of the company should be determined. This includes the current balance sheet and the value of any outstanding commercial mortgages and promissory notes. The present value of the cash flows of the business is also considered to determine the present value of future cash flows.
The next step in preparing a list of assets is to list the total assets and total liabilities in descending order of current value. The current value of the assets and liabilities must be compared with the net worth of the business to determine which asset or liability should be on the current assets list. A total assets list provides a list of assets and liabilities to be accounted for in the income statement. Current assets lists are required for tax purposes.