Working capital – Difference of Current Asset and Current Liability

Current assets can be defined as an asset on the balance sheet which is expected to be sold or otherwise used up in the near future, usually within one year, or one operating cycle – whichever is longer. Current assets include cash, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash. Current assets are important to businesses because they are the assets that are used to fund day-to-day operations and pay ongoing expenses.

Current liabilities can be defined as those liabilities that are to be paid or settled in cash within a year. Examples of current liability are accounts payable for goods, outstanding expenses etc…

The difference between current asset and current liability is known as working capital which represents operating liquidity available to business. Positive working capital is required to make sure that a company is capable to carry on its business and has adequate funds to satisfy both maturing short-term debt and future operational expenses.

1 comment… add one

Leave a Comment


Related pages


balance sheet disadvantagesunearned revenue in balance sheetdistinguish between micro and macro economiccapitalist socialist and mixed economybank reconciliation statement is prepared bycommand economy prosexamples of elastic demand productsdefinition of redeemable preference sharesdisadvantages of hire purchasedifference between import tariff and import quotaadvantages and disadvantages of traditional economyaccounting unearned revenuecontingent liabilities accountingdistinguish between systematic and unsystematic riskconsignor definitionadvantages and disadvantages of a mixed economywhat is income effect and substitution effectmeaning of floating exchange rateslums curse to urbanisationfull disclosure principle gaapexamples of primary industrydisadvantages of mixed economydiscounting a billfdi and fii meaningunclaimed dividend definitionbank loans and overdraftstally full formcrossed cheque definitiondefine complements in economicsexamples of process costingcash flow statement easy explanationaccelerated method of depreciationadvantages and disadvantages of a mixed economywhat is asba in bankingmarket skimming price strategybreak even analysis advantages and disadvantagesskimming price strategy definitionmergers and acquisitions advantages and disadvantagesconglomerate structureadvantages and disadvantages capitalismadvantages federalismadvantages of discounted cash flowadvantages and disadvantages of horizontal communicationconsignor consigneepros and cons of command economyglobalization benefits and drawbacksthe main difference between a tariff and a quota isup selling examplescalculation of crr and slradvantages of mixed economy in south africajoint ventures advantages and disadvantagesadvantage and disadvantage of mixed economyfictitious assets wikipediawhat are inferior goods examplesadvantages of command systemdupont analysis roedividend policies of companiesveblen goodsicici bank founder nametutor2u monopolydistinguish between tariff and non tariff barriersdisadvantages of organisational structurecapitalism socialism and mixed economywhat does the word consignment meanoperating lease and finance lease differencesocial media marketing advantages and disadvantagesmonopolistic marketswhat is the difference between direct expenses and indirect expenseswhat is horizontal and vertical analysisconcept of materiality in accountingadvantages of the mixed economyconglomerate corporationmerits and demerits of decentralizationadvantages and disadvantages of break evenformula to calculate net worth of a companytraditional subsistence economy