Characteristics of current assets, Managerial Accounting

Assignment Help:

Working Capital management is affected through two characteristics of current assets that are as follows (i) short life span (ii) swift transformation in the other asset forms.

Current assets consist of a short life span, cash balances can stay idle for 7 to 14 days, whereas accounts receivable generally have a life span ranging from 30-90 days and inventories may be conducted for 30 to 100 days.

All current assets are transformed in another current asset. This transformation will base upon the time and degree of synchronization of sales, production, procurement and also collection of receivables.

The production method begins with the purchase of raw material resulting in either reduce in cash or creation of accounts payable. The raw material purchased by the inventory that is further processed to generate finished goods. Finished goods are sold resulting in either raise in cash or creation of accounts receivable whereas the discharge of accounts payable outcomes in cash outflow. The operating cycle and the current asset cycle are demonstrated in figures 1 and 2 correspondingly.

1718_CHARACTERISTICS OF CURRENT ASSETS.png

Figure: Current asset cycle

730_CHARACTERISTICS OF CURRENT ASSETS1.png

Figure: Operating Cycle


Related Discussions:- Characteristics of current assets

Managerial accounting, Weldon Industrial Gas Corporation supplies acetylene...

Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store''s operations follow: 500 Garrison, Managerial Accounting, 12t

What is performance budgeting, What is performance budgeting The conce...

What is performance budgeting The concept of performance budgeting is used mainly in the government and public sector undertakings. It projects the government activities an

College accounting contemporary approach, question 3.5A Trial balance shee...

question 3.5A Trial balance sheet,income statement, owner''s equity and balance sheet

Define zero bases budgeting according to cima, Define Zero bases budgeting ...

Define Zero bases budgeting According to CIMA According to CIMA, ZBB is a method of budgeting whereby all activities are re evaluated each time a budget is set. Discrete l

Compute the expected return and risk of a portfolio, Compute the Expected R...

Compute the Expected Return and Risk of a Portfolio? The subsequent data are presented to you as a portfolio manager Security Expected Return

Gathering data-plotting graph-cost estimating relationship, Gather data con...

Gather data concerning the relationship among the dependent and independent variables Collecting data is generally the most hard and time-consuming element of CER development.

Job-Order Costing, Compute the ending balance in the Work in Process invent...

Compute the ending balance in the Work in Process inventory account. Assume that this balance consists entirely of goods started during the year. If $32,200 of this balance is dire

Extra cost decision, Discuss arguably how management accountants should dec...

Discuss arguably how management accountants should decide when are faced with the extra shift decision

Determine the price sensitivity, Price sensitivity Nagle has identified...

Price sensitivity Nagle has identified nine factors that contribute to price sensitivity and has also presents various methods or techniques to measure it. The factors that con

Jit and management accounting , JIT and Management Accounting Manageme...

JIT and Management Accounting Management accountants in many organizations have been criticized because of their failure to change their managing accounting system to reflect

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd