Formula to Calculate Current Assets
A total current asset is the total of all cash, accounts receivable, prepaid expenses, and inventory on the balance sheet of the company. The formula for the current asset is a simple aggregate of all assets which can be converted to cash during a financial year. The formula for determining the current asset account is shown below:
Current Assets = Cash and Cash Equivalents + Accounts Receivables + Marketable Securities + Inventory + Prepaid expenses + Other Liquid Assets
How to Calculate Current Assets?
To find out the value of current assets in the company, it is important to know the value of Cash and Cash Equivalents, Accounts Receivables, Marketable Securities, Inventory, Prepaid expenses, and Other Liquid Assets according to the formula.
Illustration:
A company named Gautam Enterprises deals in automobiles and has the following assets:
Cash and Cash Equivalents = ₹12,000
Machinery = ₹40,000
Marketable Securities = ₹24,000
Debtors = ₹12,150
Building = ₹54,000
Furniture = ₹10,000
Prepaid expenses = ₹4,000
Inventory = ₹5,000
Other Liquid Assets = ₹11,000
Solution:
Current Assets = Cash and Cash Equivalents + Marketable Securities + Debtors + Prepaid expenses + Inventory + Other Liquid Assets
= 12,000 + 24,000 + 12,150 + 4,000 + 5,000 + 11,000
= ₹68,150