Which items are operating current assets (OCAs)?

Which items are operating current assets (OCAs)?

• A. Cash And Cash Equivalents
• B. Accounts Receivable; Inventory; Prepaid Expenses
• C. Long-Term Investments
• D. Debt Investments

Answer: (B)

Operating current assets are the assets used in the day-to-day business operations that you expect to turn into cash or consume within the operating cycle, typically within a year. Accounts receivable, inventory, and prepaid expenses fit this category: accounts receivable represents money owed by customers for sales already made, inventory covers goods held for sale or use in production, and prepaid expenses are payments made in advance for services or benefits to be received soon (like prepaid rent or insurance). These items are directly linked to ongoing operations and the revenue cycle. Cash and cash equivalents are current assets used for liquidity rather than core operating activities, and long-term or debt investments are not part of operating current assets because they’re tied to investment activities, not daily operations. Therefore, the items that are operating current assets are accounts receivable, inventory, and prepaid expenses.

Operating current assets are the assets used in the day-to-day business operations that you expect to turn into cash or consume within the operating cycle, typically within a year. Accounts receivable, inventory, and prepaid expenses fit this category: accounts receivable represents money owed by customers for sales already made, inventory covers goods held for sale or use in production, and prepaid expenses are payments made in advance for services or benefits to be received soon (like prepaid rent or insurance). These items are directly linked to ongoing operations and the revenue cycle.

Cash and cash equivalents are current assets used for liquidity rather than core operating activities, and long-term or debt investments are not part of operating current assets because they’re tied to investment activities, not daily operations. Therefore, the items that are operating current assets are accounts receivable, inventory, and prepaid expenses.