1,159 views

Management accounts – the balance sheet current assets

The current assets are the category most people would be familiar with. They are items which are expected to be converted into cash and consist of:

Stock
o Stock consists of the items purchased by the business to sell and is valued at the lower of cost or net realisable value
o There should be sufficient stock in the business at all times to ensure the needs of the customers are met
o If items become worthless then the cost has to be written down and the difference taken to the profit and loss account as a charge

Investments
o Where a decision is made to sell an investment which has previously been classified as fixed it is the moved to current assets as it is expected to be sold within one year
o Also where investments are only expected to be held for a short time i.e. less than a year they will be shown as current assets
o Security bonds

Debtors
o Trade debtors or accounts receivable (AR) is made up the sales invoices sent to customers for the goods and services sold, these should be converted into cash and where customers are not paying on time they need to be chased
o Prepayments as discussed above are costs which have been paid for in advance
o Other debtors are any debtors which do not fall into the above categories an example would be VAT repayments

Cash at bank and in hand
o This is all the cash held by the business in bank accounts and in cash