What do you mean by Current Assets?[5 Marks]

Issues Relating to Current / Non–current Classification
A major conceptual advance in the revised Schedule is introduction of current/ non-current distinction in the balance sheet.
Separate classification of current and non-current assets and liabilities on the face of the balance sheet provides useful information by distinguishing the assets/liabilities that are continuously circulating as working capital from those used in the entity's long term operations.
It may be emphasised that current/non-current presentation is particularly useful in the case of entities which supply goods or services within a clearly identifiable operating cycle.
It may also be mentioned that in the case of entities like financial institutions, a presentation of assets and liabilities in increasing or decreasing order of liquidity provides more relevant information. However, the revised Schedule does not provide this option.
Current Asset
The revised Schedule states that an asset shall be classified as current when it satisfies any of the following norms :
  1. it is expected to be realised in, or is intended for sale or consumption in, the company's normal operating cycle;
  2. it is held primarily for the purpose of being traded;
  3. it is expected to be realised within 12 months after the reporting date; or
  4. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
All other assets shall be classified as non-current.
Current assets include assets such as inventories and trade receivables that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within 12 months after the reporting period. Current assets also include assets held primarily for the purpose of trading and the current portion of non-current financial assets.