Explain the difference between current assets and fixed assets, and how they are listed on the balance sheet
What will be an ideal response?
Answer: The asset section of the balance sheet is often divided into current assets and fixed assets. Current assets include cash and other items that will or can become cash within the following year, such as short-term investments such as money-market funds and accounts receivable (amounts due from customers). Fixed assets (sometimes referred to as property, plant, and equipment) are long-term investments in buildings, equipment, furniture and fixtures, transportation equipment, land, and other tangible property used in running the business. Fixed assets have a useful life of more than one year.
Assets are listed in descending order by liquidity, or the ease with which they can be converted into cash. Thus, current assets are listed before fixed assets. The balance sheet gives a subtotal for each type of asset and then a grand total for all assets.
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