Current and non-current assets: examples and differences!

Read the text and discover the difference between current and non-current assets in a simplified way.

Current and non-current assets are two common terms when it comes to a company's balance sheet. 

However, many people do not know what they mean and what the difference is between them, which is common with finance and accounting terms.

In short, both are important in company management, especially for separating and organizing accounts, but each has different particularities and characteristics.

Continue reading and clear up your main doubts on the subject.

In an organization, liabilities are the company's financial obligations, while assets are everything it can convert into money.

What are current and non-current assets?

To understand the difference between these two assets, you first need to find out what each one means. 

So, keep reading!

Current assets

Current assets are assets that the company needs to convert into cash in the short term, normally in the company's fiscal year, which would be a maximum of 12 months. 

Its main feature is that it has high liquidity, which means it can be converted into cash in a short period of time.

This asset is what provides financial support for the company; it is what allows it to pay off routine expenses, such as taxes, utility bills, suppliers, services and employee salaries.

Among the main examples of current assets we find, for example:

• Goods;
• Stock;
• Credits;
• Raw materials;
• Accounts receivable and financial investments, both short-term;
• Cash in hand.

The money generated by current assets must be directed towards paying current liabilities, as already mentioned, which are the company's financial obligations, in other words, accounts payable.

In short, it is valid to say that current assets serve to maintain the company's financial balance and its financial obligations up to date, thus preventing it from becoming indebted.

Non-current assets

It won't be long before you understand the difference between current and non-current assets. Now, it's time to find out what is a non-current asset. 

As the term itself indicates, it is the opposite of current assets, to be clearer, it is represented by all goods that can only be converted into money in the medium or long term.

Typically, these are investments that offer a return expected over a period of more than 12 months. Here we note the main difference between current and non-current assets.

This is because, as already presented, current assets are resources that can be converted to finance within a period of no more than 12 months.

To help readers understand non-current assets, we will show some examples below:

• Real estate;
• Equipment;
• Intellectual property;
• Long-term investments;
• Machines;
• Tools.

Any durable asset of the company that is used to generate revenue is also considered non-current assets.

They are responsible for providing payments for the non-current liabilities, just as current liabilities receive revenue from current assets.

What is the difference between current and non-current assets?

Knowing each asset above, you have certainly already noticed the main differences between them, right: 

However, let's reinforce these differences a little further. Take a look at the table below: 

Current assets	Non-current assets
Achievable in the short term, maximum 12 months	Achievable in the long term
Provides resources for current liabilities	Provides recourse for non-current liabilities

In short, the main difference between them is the time it takes for assets to convert into cash.

Furthermore, it depends on the destination that the resources take, that is, where, for what purpose or expenses they are intended.

Types of current assets 

These assets are divided into categories, which means there are different types, the three main ones being: net current, operational current and cyclical current.

1. Net working capital

Also known as a financial asset, it represents the capital acquired from the company's investments and activities.

This type can be divided into current and non-current assets, However, net current assets can be converted in less time. 

Net non-current assets, in turn, take longer to be transformed, and are also intended for long-term accounts.

Examples:

• Applications in shares;
• Real estate funds;
• Private and public titles.

What determines whether an account is current or not is its liquidity, therefore, if it exceeds 12 months, it is considered a non-current asset.

With net current assets, the company can generate more profit and expand the business in a shorter time.

2. Operating current assets

This model concerns the company's operational activities. There are alternatives for current and non-current operational assets as well. 

Examples of operational current assets:

• Stocks;
• Duplicates receivable.

Operating non-current assets:

• Tools;
• Equipment used in the production system.

3. Cyclical current

They are linked to the routine activities of the business, that is, the organization's operational cycle. 

It is intended for the company's periodic payments, therefore, none of these bills can go unnoticed, as it will affect the company's operations.

Examples:

• Advance with suppliers;
• Goods.

We cannot fail to mention the permanent assets, although it does not fall into the category of current assets, it is essential for organizing the company's accounting.

It represents assets that will be difficult to transform into capital for the company, or will take a long time to do so.

O intangible assetl is also an important asset in the company, although it does not exist physically, it can generate profit for the company.

An example of this asset is software, an online product, but one that can generate resources.

The types of current assets are integrated into categories. Within the 3 main categories, we find different accounts. See the table below.

Availability	Credits	Stock
Box	Receivables	Goods that have not yet been sold
Financial applications	Titles receivable	Raw materials and products that can be resold in cases of financial problems
Bank account movement	Interest receivable
Bank deposits	Other credits

Types of non-current assets

Non-current assets are the company's long-lasting assets, which will bring returns in the medium or long term. 

They can be machines, equipment or investments that will only bring results after a year. 

There are current assets that end up being classified as non-current due to their return time.

Therefore, the liquidity factor is very important when defining the current and non-current assets of the company.

Conclusion

In this text, you discovered in a simple and quick way what current and non-current assets are, in addition, you saw examples and main differences between them. 

If you deem it necessary, search accounting websites, for example, for more detailed articles on the subject or ask a professional for guidance.

Ultimately, Share Capital is a liability in the company, read the text and find out how to set the value.