Which item is typically not classified as a current asset?

Which item is typically not classified as a current asset?

• A. Equipment
• B. Cash
• C. Accounts receivable
• D. Inventory

Answer: (D)

Current assets are resources a business expects to convert into cash or use up within one year or the operating cycle. Cash, accounts receivable, and inventory all fit that idea because they are either already cash or will be turned into cash or consumed in the near term. Equipment, by contrast, is a long-term asset used in operations over several years and is not expected to be converted into cash within the year; it is recorded as a noncurrent (fixed) asset and depreciated over its useful life. So the item not classified as a current asset is equipment. Inventory is a current asset.

Current assets are resources a business expects to convert into cash or use up within one year or the operating cycle. Cash, accounts receivable, and inventory all fit that idea because they are either already cash or will be turned into cash or consumed in the near term. Equipment, by contrast, is a long-term asset used in operations over several years and is not expected to be converted into cash within the year; it is recorded as a noncurrent (fixed) asset and depreciated over its useful life. So the item not classified as a current asset is equipment. Inventory is a current asset.