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Financial Statements of a Company — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyFinancial Statements of a Company3 Marks
Question
Operating Cycle and the period when payment is received is given below. How will you classify the asset?
Particulars
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Operating Cycle (Months)
10
10
10
15
15
20
Expected Period when payment is received (Months)
9
12
14
14
18
18
✓

Answer

  1. An asset, of which the payment is to be received within 12 months from the Balance sheet date, shall be treated as current. Period of operating cycle is irrelevant in such cases. Hence, assets in case of (i) and (ii) shall be treated as current assets.
  2. Assets, the payment of which is received in more than 12 months from the Balance Sheet date:
  1. If payment period is less than the period of operating cycle, the assets shall be treated as Current Asset. Hence, assets in case of (iv) and (vi) shall be treated as current Assets.
  2. If payment period is more than the period of operating cycle, the assets shall be treated as Non-Current assets. Hence, Assets in case of (iii) and (v) shall be treated as Non-current Assets.

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