Differentiate between permanent operating current assets and temporary operating current assets.

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Differentiate between permanent operating current assets and temporary operating current assets.

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Differentiate between permanent operating current assets and temporary operating current assets.

Explanation & AnswerSolution by a verified expert

Explanation

The difference between permanent operating current assets and temporary operating current assets is as follows:

Temporary current assets are the extra current assets that come into existence due to an increase in the fluctuating assets such as accounts receivable or inventory. However, permanent current assets are the minimum amount of assets that are required by the company to run its business smoothly.
An example of temporary current assets is an increase in inventory and accounts receivable due to an increase in demand for the product, whereas an example of permanent current assets are assets that reduce at a faster rate such as cash, accounts receivable, and so on.

Verified Answer

The temporary current assets are the assets that fluctuate over time and are consumed within the period of one year. However, permanent current assets are the assets that the company needs to continue its operations.

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