Practice question · Multiple choice
The current/non-current split turns on one year, which seems arbitrary. What does the boundary actually serve?
Hints
- Ask what question a lender asks first about a balance sheet.
- Why would you care which assets are quick?
Show the answer
D. Liquidity assessment: what can be turned into cash soon
Why
The classification exists to make short-term solvency visible. This is why the current ratio compares current assets with current liabilities and not totals.
Practise Accounting for Assets
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More questions on Accounting for Assets
- Under the conservatism principle, gains should be anticipated and recognised early.
- Complete the depreciation formula.
- Net book value is cost minus accumulated depreciation, and net realisable value is what the asset would…
- Match each depreciation method to its pattern.
- A fully depreciated machine still produces daily. What does its zero book value actually mean?
- Which are intangible assets?