Which statement best describes current assets?

Which statement best describes current assets?

• A. Cash and other assets expected to be exchanged for cash or consumed within a year.
• B. Long-term investments not realized within the accounting year.
• C. Property, plant and equipment.
• D. Financial obligations due within one year.

Answer: (A)

Current assets are resources a business expects to convert to cash or use up within one year (or the operating cycle). The statement about cash and other assets expected to be exchanged for cash or consumed within a year fits this idea exactly, since it emphasizes both liquidity and the one-year time frame. The other descriptions refer to items not considered current assets: long-term investments are non-current assets, property, plant and equipment are fixed non-current assets, and obligations due within one year are current liabilities, not assets.

Current assets are resources a business expects to convert to cash or use up within one year (or the operating cycle). The statement about cash and other assets expected to be exchanged for cash or consumed within a year fits this idea exactly, since it emphasizes both liquidity and the one-year time frame. The other descriptions refer to items not considered current assets: long-term investments are non-current assets, property, plant and equipment are fixed non-current assets, and obligations due within one year are current liabilities, not assets.