Current and Non-Current (Assets and Liabilities)

 Assets and Liabilities are divided into Current and Non-Current.

Current Assets; Something that is likely to turn into cash (or save you from paying cash) within the current trading period.

Cash at Bank - already cash

Accounts Receivable - turn into cash when you clients pay

Inventory - will turn into cash after you sell it, may have to become accounts receivable first.

Accrued Revenue - this is a  bit like inventory, you send a bill and then it becomes accounts receivable and the cash.

Prepaid expenses - Prepayments will not turn into cash, because it is cash you have already paid out. Prepayments will save you paying this cash in the future.

Non-Current Assets

The most obvious examples are physical assets like buildings, equipment, vehicle and furniture.  You expect these items to last more than one account period.  As you use them up you will incur depreciation expense and corresponding build up your accumulated depreciation (a contra to the asset).

There are also intangible assets such as goodwill, patents, trademarks and copyright.  These have value because they provide the capacity to provide a future stream of cash.  They are subject to impairment (AASB 136). This is much like depreciation and recognize that you are using them up over time.

Typically a non-current account will be accompanied by a contra account.  The non-current account will record the cost of the asset and the contra account will record how much of that cost has so far been allocated (e.g. Accumulated Depreciation)

Current Liabilities

Similarly if there is a liability that you expect to pay out cash or have been paid for something that you have not delivered within the current trading period it is a current liability.  Examples include

Bank Overdraft

Accounts Payable

Accrued Expenses (Such as Salaries Payable)

Unearned Revenue: You have been paid the revenue, but you still need to deliver the service.

Non Current Liabilities

A long term loan is a good example (except the portion that is due for repayment within the next year, however in this unit mainly work on the basis that it is all non current)