Which type of asset is cash classified as?

Cash is classified as a current asset because it is expected to be converted into cash or used up within one year or one operating cycle, whichever is longer. Current assets are crucial for a business as they are used in day-to-day operations and are crucial for maintaining liquidity. This classification reflects the notion that cash is available for immediate use to cover short-term obligations, pay liabilities, or fund ongoing operations.

In a business's balance sheet, current assets are listed alongside other assets that are also expected to be liquidated or turned to cash within an operating period, providing insight into the company's short-term financial health. This classification aids stakeholders in assessing the company's capacity to meet its short-term obligations.