Current and Noncurrent Assets

Both current and noncurrent assets are sums that can be found on a balance sheet as used for accounting in business. When running a business it is important that all assets of a company are accounted for when creditors need to know how much the company is worth. A balance sheet is one of the many major financial statements that accountants use when calculating the assets both current and noncurrent, of a company. The balance sheet is also sometimes referred to as the statement of financial position. The term, statement of financial position means simply, a document that is used to show what position the company is currently in financially (Kimmel, 2007).

Current Assets

Current assets are described as items on a balance sheet that equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted into cash in less than a year. The creditors that are invested in a company are interested in how much the company has in current assets. These assets can often be easily liquidated if the company should go bankrupt. Current assets can also be important to a company in situations where a source of funds is needed for day-to-day operations (AccountingCoach, 2012).

Noncurrent Assets

Noncurrent assets are those that cannot be converted to cash equivalence within a year's time. Some examples of noncurrent assets are fixed assets, intangible assets, and leasehold improvements. Basically, noncurrent assets are the exact opposite of current assets (AccountingCoach, 2012).

Order of Liquidity

The order of liquidity is the order in which assets are listed on a balance sheet and is based on how long the asset will take to liquidate. The list is in order of quickest to longest and starts with cash. The reason assets are listed in such a way is to use what is quickly available first and then continue working down the list as needed (InvestorWords, 2012).

All of the components such as current and noncurrent assets and order of liquidity are hugely important to the balance sheet of an accountant or investor. The balance sheet covers a company's financial situation to the end of a specific date. The balance sheet has also been called a ‘snapshot report' of a company's financial position at a certain point in time. A good example would be amounts reported on June 31, 2012 until June 31, 2013. All transactions through the