Which asset classification includes cash and accounts receivable?

Which asset classification includes cash and accounts receivable?

• A. Current assets
• B. Plant, property, & equipment
• C. Intangible assets
• D. Natural balance

Answer: (A)

Current assets are assets you expect to use or convert into cash within one year or the normal operating cycle. Cash is already cash, and accounts receivable is money you expect to collect from customers soon. Because both are highly liquid and short-term, they fit the current assets category on the balance sheet. In contrast, plant, property, and equipment are long-term tangible assets used in operations and not readily converted to cash; intangible assets are non-physical assets like patents or goodwill; natural balance refers to the typical accounting balance of a group of accounts rather than a classification of assets. So cash and accounts receivable belong under current assets.

Current assets are assets you expect to use or convert into cash within one year or the normal operating cycle. Cash is already cash, and accounts receivable is money you expect to collect from customers soon. Because both are highly liquid and short-term, they fit the current assets category on the balance sheet. In contrast, plant, property, and equipment are long-term tangible assets used in operations and not readily converted to cash; intangible assets are non-physical assets like patents or goodwill; natural balance refers to the typical accounting balance of a group of accounts rather than a classification of assets. So cash and accounts receivable belong under current assets.