A current asset is:
A)an item currently owned by the firm.
B)an item that the firm expects to own within the next year.
C)an item currently owned by the firm that will convert to cash within the next 12 months.
D)the amount of cash on hand the firm currently shows on its statement of financial position.
E)the market value of all items currently owned by the firm.

Question

Quizplus · Accepted Answer

A current asset is an item that is currently owned by the firm and is expected to be converted into cash within the next 12 months. This includes items like cash and cash equivalents, accounts receivable, inventory, and prepaid expenses. Choice A is too broad and does not specify the time frame for ownership, while choice B is incorrect as it refers to future ownership. Choice D is also incorrect as it only refers to the amount of cash on hand, not other current assets. Choice E is incorrect as it refers to market value, which may not be accurate for financial reporting purposes.

A Current Asset Is