Question

what is the reason that current assets and current liabilities show on balance sheet?

Answer 1

Current assets are a sum of those incomes which will be received in future. Current asset such as accounts receivables are amount that are earned but not received. Similarly interest receivables are income too but not yet received. Inventory is also a current asset as it results in future cash flow when sold.

Current liabilities are nothing but those expenses that are not yet paid and will be paid in near future hence considered a current liability of business such as Accounts payables, notes payables, interest payables, salaries payables etc.

All assets including Current assets, and all liabilities including current liabilities are shown in balance sheet. We show current assets and current liabilities due to accrual accounting system and matching principle where cash to be received are recorded as an asset and cash to be paid are recorded as liability and at the same time revenues and expenses are recorded respectively even though cash is not received or paid.