A carpet and flooring business owner invests profits in a money market account. What type of asset is this?

A carpet and flooring business owner invests profits in a money market account. What type of asset is this?

• A. Fixed-Intangible
• B. Current Asset
• C. Fixed-Accounts Receivable
• D. Current-PP&E

Answer: (B)

Focusing on liquidity helps classify assets. A money market account holds funds that are readily accessible and can be quickly converted to cash to pay expenses, so it’s treated as cash or a cash equivalent. In accounting terms, cash and cash equivalents are reported as current assets because they are expected to be used or converted to cash within the operating cycle or a year. This makes the money market investment a current asset. It’s not a fixed asset, which would be long-term property or equipment; it’s not a proper accounts receivable category, and PP&E refers to fixed assets like property, plant, and equipment. So the best fit is a current asset.

Focusing on liquidity helps classify assets. A money market account holds funds that are readily accessible and can be quickly converted to cash to pay expenses, so it’s treated as cash or a cash equivalent. In accounting terms, cash and cash equivalents are reported as current assets because they are expected to be used or converted to cash within the operating cycle or a year. This makes the money market investment a current asset. It’s not a fixed asset, which would be long-term property or equipment; it’s not a proper accounts receivable category, and PP&E refers to fixed assets like property, plant, and equipment. So the best fit is a current asset.