[alicia5566]

What is the difference between current assets and non current assets? I am having difficulty understanding the two.

[AiryFairy]

I think the easiest way to think about it is in 'liquidity' terms, i.e. how long does something take to be converted into cash. So your current assets are your bank balance, because its instant cash, then stock, because you can easily sell it- that's how you are keeping your business afloat, your debtors come afterwards- they owe you money and theoretically in a perfect world you could demand the money back, or at least get it when their credit period runs out, usually a month.

So these are the cash generators. And their value tends to change on a daily basis, hence they are 'current'

Your non current assets, plant and machinery, for example, are not so easily converted into cash. You may be able to sell them relatively quick, but usually by the time you have advertised, showed a few potential buyers the goods and filled in the mountains of paperwork, few months, if not more are likely to pass. They are your fixed assets- you are pretty much stuck with them, and they are not a good source of cash, should you ever need it.

Think of your friend owing you money vs the furniture in your room!

Hope that helps!

[morgaine300]

Things like prepaids are also not easily converted to cash but they are current.

Current are those things that will be converted to cash or used within one year. Non-current will be over a year. That's at its simpliest.