1.4.1.2.1 Assets
A company’s assets can be divided into two broad categories: current assets and long-term assets. Current assets are anything that could be converted into cash within a year. Current assets consist of:
• Cash and cash equivalents—cash and highly liquid investments, such as securities and money market instruments, that can be easily converted into cash
• Accounts receivable—money that is owed to the company by customers
• Prepaid expenses—goods or services that have been paid for, but will be received in the future (e.g., postage, insurance, office supplies)
• Inventory—products the company is holding and plans to sell in the near future. Accountants can choose between two different ways to value inventory:
» FIFO (first in, first out)—units purchased first are assumed to be sold first
» LIFO (last in, first out)—units purchased last are assumed to be sold first
In an inflationary environment, a