The term current assets does not include?

The correct option is 3.)

The term current assets do not include furniture.

Explanation

A current asset is any asset that can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within one accounting year. Thus, current assets don’t have life for more than a year.

Example: Cash and cash equivalent, stock, liquid assets, etc.

Furniture is expected to have a useful life for more than a year and they are bought for a long term by a company.

Cash is a more liquid asset of a company making it a more “current” asset. It requires no conversion and is spendable as it is. Thus, making it a vital current asset.

Stock in trade is a current asset because it can be converted into cash within one year and all the stock in trade of a company is expected to be sold within one accounting period and should not stick for a longer period.

Advance payment, on the other hand, is an amount paid to an employee, essentially a short-term loan by the employer. It’s recorded on the asset side of the balance sheet and as these assets are used, they are expended and recorded on the income statement for the period in which they are incurred, making it a short-term asset ending within an accounting year.

Thus, on the asset side of the balance sheet, we can clearly see which current assets are and which are not included in the current asset

Balance Sheet (As at…..)

Therefore, (3) Furniture, won’t be included in current assets.