Current Assets: A Comprehensive Guide to Their Legal Definition
Definition & Meaning
Current assets refer to a category of assets that a company or individual expects to convert into cash or use up within one year. These assets are essential for day-to-day operations and include:
- Cash and cash equivalents (like checks and drafts)
- Accounts receivable (money owed by customers)
- Inventories (goods available for sale)
- Supplies and raw materials
- Finished goods ready for sale
- Investments that can be quickly liquidated, such as stocks and bonds
Legal Use & context
Current assets are commonly referenced in various legal and financial contexts, particularly in corporate law, tax law, and bankruptcy proceedings. They are crucial for assessing a company's liquidity and financial health. Legal professionals may use this term when discussing:
- Financial statements and audits
- Tax obligations and assessments
- Business valuations during mergers or acquisitions
- Bankruptcy filings and asset liquidation processes
Users can manage related forms and procedures using resources like US Legal Forms, which provides templates drafted by attorneys.
Real-world examples
Here are a couple of examples of abatement:
Here are two examples of current assets:
- A retail store has $50,000 in cash, $30,000 in inventory, and $20,000 in accounts receivable. These amounts are all considered current assets.
- A manufacturing company holds $15,000 in raw materials and $25,000 in finished goods, both of which are classified as current assets. (hypothetical example)