Current assets
Learn what current assets are, see examples, and find out how to calculate them for your balance sheet.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Current assets are what your business expects to sell, use up or turn into cash within a year or one operating cycle
- They include cash, short-term investments, accounts receivable, inventory and prepaid expenses, listed in order of liquidity
- Indonesian accounting standards require you to show current and non-current assets separately on the balance sheet
- Comparing them with current liabilities shows whether you can pay the bills due this year
What are current assets?
Current assets are the things your business owns that you expect to sell, use up or turn into cash within a year. In Indonesia, they’re known as aset lancar.
Indonesian businesses classify them under PSAK 201, one of the Pernyataan Standar Akuntansi Keuangan (Statements of Financial Accounting Standards). DDTC News summarises the tests in paragraph 66 of PSAK 201, and an asset is current when:
- you expect to realise, sell or use it within your normal operating cycle
- you hold it mainly for trading
- you expect to realise it within 12 months after the reporting date
- it’s cash or a cash equivalent, unless it’s restricted from use for at least 12 months
The operating cycle test helps businesses whose cycle runs longer than a year. A winery that ages its stock for two years can still count that stock as current.
Key characteristics of current assets
These short-term resources share a handful of traits that make them useful for paying everyday costs. Together, they keep your cash flow moving between making a sale and paying a bill.
- They turn into cash, or get used up, within a year or one operating cycle
- They can be physical, like stock on your shelves, or intangible, like a bank balance or an unpaid invoice
- They fund day-to-day costs such as rent, wages, supplier bills and loan repayments
- They stay off the depreciation schedule, which is reserved for long-term assets like equipment
Think of them as fuel in a delivery van. You top it up and burn through it constantly, while the van itself is a long-term asset.
Types and examples of current assets
Balance sheets list these assets by liquidity, meaning how quickly each one becomes cash. Here are the main types, starting with the most liquid:
- Cash in the till or bank, plus cash equivalents like short-term deposits you can quickly turn into a known amount of cash
- Short-term investments, such as shares or bonds you plan to sell within a year
- Accounts receivable, which is money customers owe you for goods or services already delivered
- Inventory, including raw materials and finished goods ready to sell
- Prepaid expenses, such as an annual insurance policy or software subscription paid in advance
Picture a coffee roastery in Bandung. It holds takings in the till, a business bank balance, invoices owed by cafes, sacks of beans and a year of prepaid insurance.
The roastery pays wages in rupiah, so the owner watches how quickly stock and invoices turn into cash.
Current assets vs non-current assets
Non-current assets are resources you’ll use for longer than a year, like equipment, vehicles, buildings and long-term investments. The difference comes down to timing and how you account for each group. Compared with non-current assets, current assets:
- convert to cash within a year or one operating cycle, rather than delivering value over several years
- skip depreciation, which applies to most long-term assets over their useful life
- fund daily operations, while long-term assets build your capacity to produce and sell
- reflect short-term strength, while long-term assets say more about lasting stability
Lenders look at both groups when they assess your business. Xero’s guide to liquidity and solvency explains how short-term and long-term health differ.
How to calculate current assets
Total current assets is the sum of every short-term asset on your books at a set date. The formula is: current assets = cash and cash equivalents + short-term investments + accounts receivable + inventory + prepaid expenses.
Follow these steps to work out your own total.
- Pick a reporting date, such as the last day of the month or financial year.
- Add up cash in hand and in every business bank account, plus any cash equivalents.
- Add short-term investments you plan to sell within 12 months.
- Add accounts receivable, minus an allowance for invoices unlikely to be paid.
- Add the value of inventory on hand at the reporting date.
- Add prepaid expenses that still cover future months.
- Total the figures to get your current assets.
Example calculation in rupiah
Here’s how the Bandung roastery works out its total at 31 December. It holds these balances on that date:
- Rp50 million in cash across the till and bank account
- Rp30 million in unpaid invoices from cafes
- Rp60 million in green and roasted beans
- Rp10 million in prepaid insurance covering the coming months
The roastery holds no short-term investments, so that line is zero. Adding the four balances gives a total of Rp150 million.
How current assets appear on the balance sheet
Current assets usually sit at the top of the assets side of your balance sheet, starting with cash. A subtotal follows them, then the non-current section.
PSAK 201, published by Ikatan Akuntan Indonesia (IAI), is the renumbered PSAK 1 and took effect on 1 January 2024. It requires you to show current and non-current assets separately, unless ordering everything by liquidity gives more relevant information.
On the roastery’s balance sheet, cash comes first, then receivables, beans and prepaid insurance, with a subtotal of Rp150 million. Its roasting machine sits below, in non-current assets. With Xero, you can run financial reports like this whenever you need them.
Ratios that use current assets
These ratios compare short-term resources with current liabilities, which are debts due within a year. The examples use the roastery’s Rp150 million total against Rp100 million in current liabilities.
- Current ratio divides current assets by current liabilities: Rp150 million ÷ Rp100 million = 1.5
- Quick ratio leaves out inventory and prepaid expenses: Rp80 million ÷ Rp100 million = 0.8
- Cash ratio counts only cash and cash equivalents: Rp50 million ÷ Rp100 million = 0.5
- Working capital subtracts current liabilities from the total: Rp150 million − Rp100 million = Rp50 million
A current ratio of 1.5 means the roastery holds Rp1.5 million in short-term resources for every Rp1 million it owes this year. Its quick ratio of 0.8 shows it relies on selling beans to cover the rest.
That makes timing important. A regular cash forecast shows when invoice payments and stock sales will land against upcoming bills.
Track your current assets with Xero
Knowing these figures tells you what you can spend this month and how comfortably you’ll cover upcoming bills. Xero brings your bank balances, unpaid invoices and inventory into one place, so your balance sheet stays up to date.
Spend less time on spreadsheets and more time running your business. Sign up today to get one month free.
FAQs on current assets
These answers cover common questions small business owners ask about the topic.
Why is inventory a current asset?
You buy stock to sell it within a year or one operating cycle, so you expect it to turn into cash soon. If stock sits unsold, you may need to write its value down to what you can realistically sell it for.
Can a business have too many current assets?
Yes. A very high current ratio can mean cash is sitting idle or stock is piling up. That money could fund growth or pay down debt instead.
Are current assets depreciated?
Depreciation applies to long-term assets, like equipment you use over several years. Prepaid expenses work differently: you move a portion into expenses each month as the cover gets used.
Are current assets the same as liquid assets?
Liquid assets are a narrower group: cash and anything you can sell for cash quickly. Inventory and prepaid expenses count as current but take longer to become cash, or never convert at all.
What are non-current assets?
Non-current assets are resources that benefit your business for more than a year. Alongside physical items like equipment, they include intangibles such as trademarks and purchased software.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.