ACCOUNTANCY-6

Greetings for the day, dear students!

Hope you all are safe and healthy.
In the previous lecture, we completed Liabilities
part of the Balance Sheet. Now, we shall discuss
about the Assets of a Company.
 ASSETS
An asset is a resource controlled by the entity as a
result of past events and from which future
economic benefits are expected to flow to the
entity. Assets, like Liabilities are also divided into
two categories :-
 Non-Current Assets
 Current Assets
 Current Assets
Current assets are defined in Schedule III of the
Companies Act, 2013 as follows :-

Expected to Expected to Cash and

Held
be realised be realised Cash
primarily
within within 12 Equivalents
for the
Company's months of
purpose of
Operating Balance
Trading
Cycle Sheet date
The concept of Operatong Cycle has been explained in
the lecture of Current Liabilities. The students are
requested to revise it and then proceed. A quick recap is
stated below:-
Classification of sub-heads of
Current Assets

Current Inventories
Investments

Cash and
Trade
Cash
Receivables
Equivalents

Other Short term

Current Loans and
Assets Advances
 Current Investments
An investment is an asset or item acquired with
the goal of generating income or generating
appreciation. Current investments are those
investments which are held to be converted into
cash within 12 months from the date of purchase
of investment.
 Investment in Equity Instruments

Investment in Preference Shares

Investment in Government or Securities

C
Investment in Debentures
U
R Investments in Mutual Funds
R
E Investment in Partnership Firms

N Other Investments
T
INVESTMENTS
 Inventory
Inventory is the term used for the goods available
for sale and raw materials used to produce goods
for sale. It is the stock held with the purpose of
trade in the ordinary course of business, i.e., for
manufacturing or trading of goods are
classified as Current Assets because
they are held with the purpose to
convert them into Cash and Cash
Equivalents
 Trade Receivables
It is the amount receivable for sale of goods and
services rendered by the company in the normal
course of business. They are classified as Current
assets if they are receivable within a period of 12
months after the date of Balance Sheet or within
the Operating Cycle.

Trade receivables includes the

following:-
 Debtors
 Bills Receivables
Provision for Doubtful Debts is a provision made
to meet the possible loss of bad debts as a
percentage of Net Debtors ( Sundry Debtors – Bad
Debts)
Provision for Doubtful Debts is disclosed in either
of the following ways :-

1. The amount of Provision is either

shown under Long term or Short term
Provision depending on whether Trade
Receivables are long term or short term.

2. The amount of Provision is shown as a

deduction from Trade Receivables.
 Cash and Cash Equivalents
Schedule III requires that Cash and Cash
Equivalents be classified or shown as follows :-

Balances Cheques
with or Drafts
Banks in Hand

Earmarked
balances
Cash with
Banks

Balances Bank
with Banks Deposits with
held as more than 12
Marginal months
Maturity
Money
 Short term Loans and
Advances
Short term Loans and Advances are those loans
and advances which are expected to be realised or
received back from the debtors or the party who
borrowed it, within a period of 12months from the
date of Balance Sheet or within the Operating
Cycle of the Balance Sheet.
 Other Current Assets
All other current assets that do not fall in
any of the above classification, are classified
or shown as Other Current Assets. For
example :- Prepaid expenses, Accrued
Income, Dividend receivable, Advance
taxes, etc.
With this, we cover the topic of Current Assets. In
the next lecture, we shall discuss in detail about
Non-Current Assets.