Question

When classifying assets and? liabilities: A. assets are classified as liquid and nonminus?liquid. B. furniture and...

When classifying assets and? liabilities: A. assets are classified as liquid and nonminus?liquid. B. furniture and fixtures are longminus?term assets. C. for most businesses the operating cycle is two years. D. current liabilities include accounts receivable.

Homework Answers

Answer #1

Correct Answer is (b)

Furniture and Fixture are long term assets. These are meant for use for more than one year. For eg: Office cupboard for keeping important documents is in the nature of Furniture and is meant for use for more than one year.

Reasons for incorrect answers:

(a) In actuals, assets are classified as current and Non-current assets. There is no categorisation as liquid or non-liquid assets.

(b) Operating cycle varies with the nature of business and there is no standard operating cycle of 2 years for most businesses.

(c) Accounts receivable indicates the amount receivable from customers on account of goods sold to customers and are a part of current assets. On the other hand, current liabilities consist of amounts payable. As such, current liabilities do not include accounts receivable.

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