Current Assets - Cash and other resources which get converted into cash during the operating cycle of the firm are defined as current assets. These are held for a short period of time as against fixed assets which are held for relatively longer periods. The major components of current assets are cash, debtors, inventories, loans and advances, and pre-paid expenses.

• Cash denotes funds readily disbursable by the firm. The bulk of it is usually in the form of bank balance; the rest comprises currency held by the firm.

• Debtors (also called accounts receivable) represent the amounts owed to the firm by its customers who have bought goods, services on credit. Debtors are shown in the balance sheet at the amount owed, less an allowance for the bad debts.

• Inventories consist of stocks of raw materials, work-in-progress, finished goods, stores and spares. They are usually reported at the lower of cost or market value.

• Loans and advances are the amounts to employees, advance given to suppliers and contractors and deposits made to governmental and other agencies. They are shown at the actual amount.

• Prepaid expenses are expenditures incurred for services to be rendered in the future. These are shown at the cost of unexpired reserve.

Under the category of Current Assets, the following should be listed individually under broad heads:

1. Stores and Spare parts,

2. Loose Tools,

3. Stock-in-Trade,

4. Work-in-Progress,

5. Sundry debtors,

6. Cash balance on hand,

7. Bank balances, and

8. Other current Assets.

Under the category of Loans and Advances, the following should be shown:

1. Advances and Loans to subsidiaries.

2. Advances and Loans to partnership firms in which the company or any of its subsidiaries is a partner.

3. Bills of Exchange.

4. Advances recoverable in cash or in kind or for value to be received; for example, Rates, Taxes, Insurance, etc.

5. Balances with Customs, Port Trust, etc.

The classifications and details shown with respect to sundry debtors should also be followed and disclosed in schedule for 'Loans and Advances'.

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