What does current assets mean in company accounts?
What are current assets?
Current assets are everything a company owns that is not a fixed asset. The Small Companies Regulations define fixed assets as assets intended for use on a continuing basis in the company's activities, and current assets as "assets not intended for such use". In practice these are items the company expects to sell, collect or spend in the normal trading cycle.
They matter to a creditor because current assets are what pays current liabilities.
What is included
Heading C of the statutory balance sheet format has four parts:
| Item | What it usually is |
|---|---|
| I. Stocks | Goods for resale, raw materials, work in progress, payments on account |
| II. Debtors | Trade debtors (unpaid customer invoices), amounts owed by group companies, other debtors |
| III. Investments | Shares or other investments held short term |
| IV. Cash at bank and in hand | Bank balances and petty cash |
"Other debtors" often contains a director's loan when a director owes the company money, and can include unpaid share capital. Prepayments and accrued income may be shown separately as heading D or included within debtors. Debtors falling due after more than one year must be shown separately, so read the note.
Where it sits on the balance sheet
Current assets come straight after fixed assets in Format 1 of Schedule 1 to the Small Companies Regulations (SI 2008/409). Creditors due within one year are deducted next, giving "Net current assets (liabilities)", and then fixed assets are added back to reach total assets less current liabilities.
- Small company accounts (FRS 102 Section 1A): stocks, debtors and cash are usually shown as separate lines, with a debtors note.
- Micro-entity accounts (FRS 105): the micro-entity format has a single heading, "Current assets", with no split. You cannot see how much is cash and how much is unpaid invoices.
Worked example
Example (illustrative figures, not a real company):
| Balance sheet line | £ |
|---|---|
| Stock | 20,000 |
| Trade debtors | 35,000 |
| Other debtors | 5,000 |
| Cash at bank and in hand | 10,000 |
| Current assets | 70,000 |
| Creditors: amounts falling due within one year | (60,000) |
| Net current assets | 10,000 |
The company looks liquid: £70,000 of current assets against £60,000 due within a year, a current ratio of about 1.17. But only £10,000 is cash. If £20,000 of the trade debtors turn out to be uncollectable, current assets fall below creditors and the company has net current liabilities.
What it tells a credit checker
Compare current assets with creditors due within one year on the same balance sheet. A current ratio below 1 means the company cannot pay its short-term debts from short-term assets alone and relies on new sales, a lender or its director.
Then look at the mix. Cash is certain; debtors depend on customers paying; stock may sell slowly or at a discount. A rise in debtors much faster than the business grows can mean the company is struggling to collect, which often comes before it struggles to pay you.
Our data gives a sense of scale. Of 3,575,087 active companies whose latest machine-readable accounts end on or after 1 January 2024, 76.0% report positive current assets; the median among them is £27,506 and a quarter hold £5,213 or less. The median company holds £10,127 in cash, its median current ratio is 1.19 and 36.2% report net current liabilities, as shown in our study of how much cash UK small companies hold. See also cash at bank and in hand.
To compare a company's current assets with its creditors over several years, search the company.
Sources
- The Small Companies and Groups (Accounts and Directors' Report) Regulations 2008, Schedule 1 (balance sheet formats, notes on debtors and prepayments)
- The Small Companies and Groups (Accounts and Directors' Report) Regulations 2008, Schedule 8 (definition of fixed and current assets)
- GOV.UK: Prepare annual accounts for a private limited company
FAQ
Is a director's loan a current asset?
When a director owes the company money, the balance is usually shown under debtors, often as "other debtors", so it sits in current assets. That makes current assets look stronger than they are if the director is unlikely to repay soon. Small company accounts must disclose advances to directors in the notes, which helps you spot it.
What is a good current ratio for a small company?
There is no single target. A ratio above 1 means current assets exceed short-term debts, and the median active UK company in our data sits at 1.19. Property companies and restaurants often run below 1, while a trading supplier below 1 is a stronger warning. Compare with the same company's previous years and with its sector.
Why do micro-entity accounts not show cash?
The micro-entity balance sheet format lists current assets as one heading with no sub-items, and micro-entities may file very limited notes. Some still show cash voluntarily or in iXBRL tags, but many do not. Where cash is missing you can only judge liquidity from total current assets against creditors due within one year.
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