Current vs Non-Current Assets

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Difference Between Current and Non-Current Assets

Assets are resources for a business; assets are of two types, namely current assets and non-current assets. Current assets are equivalent to cash or will get converted into cash within a time frame of one year. Non-current assets are those assets that will not get converted into cash within one year and are noncurrent.

Current assets consist of cash and equivalents, which is generally the first line item on the asset side of the balance sheet when a balance sheet is prepared based on liquidity. Cash equivalents are usually commercial papers that a company invests in as liquid as cash. Other current assets are accounts receivables, the amount of money the company owes from the debtors to whom they have sold their goods on credit..

Another significant current asset inventories; any business needs to maintain a certain inventory level for running the business. Both high and low levels of inventory are not desirable by a company. Other current assets include deferred income taxes and prepaid revenue.

PPE forms the major part of noncurrent assets for a business. Plant machinery and equipment are reported on the balance sheet at book value, generally the acquisition cost for that hard asset. Companies also depreciate the plants and machinery either through the straight-line method or Double Declining method.

Net PP&E is reported by the company, which gross PP&E adjusted for accumulated depreciation. Other noncurrent assets comprise long term investments, long term deferred tax, accumulated depreciation, and amortization. Goodwill is an example of an intangible asset. Intangible assets are adjusted for amortization, not depreciation.

Difference Between Current and Non-Current Assets

Current Assets vs. Non-Current Assets Infographics

Current Assets Video

Key Differences

Current assets are equivalent to cash or will get converted into cash within a time frame of one year. Non-current assets or long-term assets are those assets that will not get converted into cash within one year and are non-current.
The list of current assets includes cash and cash equivalents, short-term investments, accounts receivables, inventories, and prepaid revenue. The list of non-current assets includes long-term investments, plant property and equipment, goodwill, accumulated depreciation and amortization, and long term deferred taxes.
Current assets, when sold, are considered as trading profits and are subject to corporate tax. On the other hand, whenever long term assets are sold, that is regarded as capital gain, and capital gain tax is applicable in that case.
Current assets are not subject to revaluation in general. Only in some cases may inventories be subject to revaluation. Long-term assets, like PP&E, need to be revalued by the company. Whenever the market value of a tangible asset decreases compared to the book value of that asset. The company needs to revalue that assets book value and the difference is reported as a loss in the income statement for that period.

Comparative Table

Basis	Current assets	Non-current assets
Definition	Current assets are equivalent to cash or will get converted into cash within a time frame of one year.	Noncurrent assets are those assets that will not get converted into cash within one year and are noncurrent.
Items	Currents assets include line items like cash and cash equivalents, short term investments, accounts receivables, inventories, and prepaid revenue.	Noncurrent assets include long term investments, plant property and equipment, goodwill, accumulated depreciation and amortization, and long term deferred taxes assets.
Nature	Current assets are the short term resources of a company.	These assets are the long term resources to run the business.
Valuation	Generally, current assets are valued in the balance sheet at market prices.	Long term assets are valued in the balance at acquisition cost less accumulated depreciation. For intangible assets, they are valued at cost less depreciation.
Goodwill	Not part of current assets	Noncurrent assets can be further subdivided into tangible assets and intangible assets. A most popular intangible asset is goodwill, which is created through acquisition.
Tax implications	The selling of the current assets results in a profit from trading activities	Selling the long-term assets results in capital gains, and capital gain tax is applicable in such a case.
Revaluation	Current assets are not generally subject to revaluation; only in some cases may inventories be subject to revaluation.	Revaluation of PP&E is very common in the case of long-term assets. Whenever the market value of a tangible asset decreases compared to the book value of that asset. The company needs to revalue that asset's book value and the difference in reported a loss in the income statement for that period.

Conclusion

Assets are the resources required by a company to run and grow its business. Long-term assets are required for long-term business purposes like land equipment and machinery, which are needed for long-term business—current and noncurrent assets combined to form the total assets required by a company.

On the other hand, current assets are the resources that are required for running the day to day operations of a business. The current assets are generally reported in the balance sheet at the current or market price. On the other hand, noncurrent assets are reported in the balance sheet at the cost price on acquisition adjusted for depreciation/amortization, which is subjected to revaluation whenever the market price decreases compared to the book price.