What is a current asset?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A current asset is cash, or an asset a business expects to sell, collect or use up within 12 months. Examples include money in the bank, petty cash, stock held for sale, amounts customers owe and expenses paid in advance. A balance sheet groups them apart from longer-term assets such as equipment.
The word current is about timing. An asset counts as current when it is already cash, or will turn into cash or be used up soon. Stock waiting to be sold and invoices customers have not yet paid both count, because each is expected to turn into cash soon.
Current assets are what a business draws on to pay its bills in the months ahead. Setting them against the debts due over the same stretch of time gives a quick read on short-term health, and a business can own valuable equipment yet still be short of current assets.
In Australia
business.gov.au defines a current asset as cash or something you can convert into cash within 12 months. Its balance sheet template lists cash, petty cash, inventory and prepaid expenses under current assets, then adds them to fixed assets to reach total assets.
Its glossary treats accounts receivable, the amounts customers still need to pay, as short-term accounts of less than 12 months, so money owed by customers falls inside the same window.
Worked example
| Item | Amount (AUD) |
|---|---|
| Cash at bank | 6,400.00 |
| Petty cash | 150.00 |
| Accounts receivable | 4,250.00 |
| Inventory | 7,300.00 |
| Prepaid expenses | 1,200.00 |
| Total current assets | 19,300.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Listing vehicles or equipment as current assets because they could be sold quickly, when the business keeps them for ongoing use.
- Counting money owed by customers who are unlikely to pay without flagging it for your accountant.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Set up a balance sheet
business.gov.au, Australian Government. Current at 15 October 2026, released 18 January 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.