Current assets
Current assets are what your business expects to turn into cash or use up within a year. Here’s how they work.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Current assets are what your business owns and expects to turn into cash, sell or use up within 12 months or one operating cycle
- Common examples include cash, accounts receivable, inventory and prepaid expenses, and you find the total by adding them together
- Singapore companies generally show current and non-current assets separately on the balance sheet, and IFRS 18 keeps this split from 2027
- Comparing current assets with current liabilities shows your working capital, so you can plan ahead and borrow with confidence
What are current assets?
Current assets are the things your business owns that you expect to turn into cash, sell or use up within 12 months. They cover money you already have, plus items that will become money soon.
Corporate Finance Institute describes them as assets you expect to convert to cash within one year. Because they turn over quickly, current assets are what you draw on to pay rent, wages, supplier bills and loan repayments due this year.
Think of a bakery. The flour bought this week becomes bread sold tomorrow, and the takings land in the till by evening. The flour and bread are inventory and the takings are cash, so they all count as current assets.
Types and examples of current assets
Current assets include anything your business can turn into cash in the short term. These are the most common types, listed by how quickly they usually turn into cash:
- Cash in your till, petty cash and balances in your business bank account
- Cash equivalents, such as fixed deposits maturing within three months
- Short-term investments and marketable securities, such as shares you plan to sell within the year
- Accounts receivable, meaning invoices your customers haven’t paid yet
- Inventory, including raw materials, work in progress and finished goods for sale
- Prepaid expenses, such as an annual insurance policy or software subscription paid upfront
- Other liquid assets, such as a refundable deposit you expect back within the year
Prepaid expenses work differently from the rest: you use them up instead of selling them. They still count because they cover a cost you’d otherwise pay in cash later in the year.
Picture a small homeware shop in Tiong Bahru. Its current assets might be money in the bank, cushions on the shelves, a café client’s unpaid invoice and a year of prepaid shop insurance.
How to calculate current assets
To calculate current assets, add up the value of every current 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 + other current assets
Follow these steps to work out the total for your business:
- Pick a reporting date, such as the last day of the month or your financial year end
- Check your bank balances, petty cash and any short-term deposits on that date
- Total your unpaid customer invoices, leaving out any you don’t expect to collect
- Count your stock and value it at what it cost you
- Add up prepaid expenses that cover the months after your reporting date
- Include short-term investments or other assets you’ll turn into cash within 12 months
- Add every figure together to get your total current assets
Here’s how that works for a florist in Tampines calculating current assets on 30 June. The owner’s figures are:
- S$18,500 in the bank and the till
- S$6,200 in unpaid invoices from corporate clients
- S$12,300 of flowers, vases and packaging in stock
- S$2,400 left on a prepaid annual shop insurance policy
Added together, the florist’s current assets come to S$39,400. This total feeds straight into the liquidity checks covered later in this article.
Current assets vs non-current assets
Non-current assets are the ones you expect to keep for longer than 12 months, such as equipment or a delivery van. The two groups differ mainly in timing and in how you record their value:
- Current assets turn into cash or get used up within 12 months; non-current assets deliver value over several years
- Current assets are usually quick to convert to cash; non-current assets can take months to sell at a fair price
- Current assets aren’t depreciated because you use them quickly; non-current assets like equipment lose value gradually through depreciation
- Current assets include physical items like stock and non-physical ones like receivables and prepayments; non-current assets mix both too
In a café, the coffee beans are current assets and the espresso machine is a non-current asset. You’ll use up the beans within weeks, while the machine earns its keep for years.
Current assets on the balance sheet
On your balance sheet, current assets usually sit at the top of the assets section. They’re listed in order of liquidity, starting with cash and moving down to less liquid items like stock and prepayments, followed by a subtotal.
Singapore-listed companies report under SFRS(I), a framework identical to International Financial Reporting Standards (IFRS), while many smaller companies can use SFRS for Small Entities instead. Under IAS 1, you split assets into current and non-current on your statement of financial position. The exception is when listing everything in order of liquidity gives more reliable, relevant information.
The standard also treats an asset as current if you expect to realise it within your normal operating cycle. This applies even when that cycle runs past 12 months. A furniture maker whose pieces take 18 months to build and sell would still class that stock as current.
IFRS 18 replaces IAS 1 from 2027 and carries forward many of its requirements, including this split.
Why current assets matter for your business
Current assets show how easily you can pay the bills due in the coming year. Comparing them with your current liabilities tells you and any lender how much breathing room you have.
The gap between the two is your working capital, the cushion that covers payroll and supplier bills in slower months. If the Tampines florist owes S$20,000 in current liabilities, its working capital is S$19,400.
The current ratio divides current assets by current liabilities, so the florist’s is S$39,400 ÷ S$20,000, or 1.97. Corporate Finance Institute notes this ratio can overstate your position because it includes inventory, which may take time to sell.
The quick ratio adjusts for that by counting only assets you can convert within about 90 days, such as cash and receivables. For the florist, (S$18,500 + S$6,200) ÷ S$20,000 gives a quick ratio of 1.24.
Both belong to a wider group of liquidity ratios that measure your short-term position. Liquidity covers the next 12 months, while solvency looks at whether you can meet all your debts over the long term.
These figures also help when you apply for a business loan. Accurate current assets show a lender you can keep up with repayments.
Track your current assets with Xero
Knowing your current assets helps you plan for upcoming bills and talk to lenders with confidence. Xero keeps your bank balances and invoices up to date through bank feeds, so your balance sheet reflects your latest figures.
You can run financial reports, including your balance sheet, whenever you need them and share them with your accountant. Sign up today and get one month free.
FAQs on current assets
These answers cover the edge cases small business owners often run into when classifying current assets.
Is inventory always a current asset?
Stock you hold for sale is a current asset, even if some of it takes over a year to sell within your operating cycle. Spare parts you’ll use to maintain equipment over several years may be classed as non-current instead.
Do unpaid invoices you might never collect count as current assets?
Only the amount you expect to collect counts. Write off bad debts or set aside an allowance for doubtful debts, so your current assets show a realistic figure.
Is a fixed deposit a current asset?
A fixed deposit maturing within 12 months is a current asset. If its term is three months or less when you place it, it usually counts as a cash equivalent. Deposits locked in for longer than a year are non-current assets.
Can a non-current asset become a current asset?
Yes, as its due date moves inside the next 12 months. For example, if a customer agreed to pay you over two years, the portion due within the coming year moves into current assets.
How often should you check your current assets?
Checking them monthly alongside your current liabilities helps you spot a tight month ahead of time. Bank feeds keep the figures up to date, so the check takes minutes.
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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.