There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): Inventories may be shown as Non-current assets in the balance sheet of a company.
Reason (R): Inventories are shown as current assets because they are held to be realized at the earliest by the company.
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Only Reason (R) is correct.
Assertion (A): Inventories may be shown as Non-current assets in the balance sheet of a company. This is false.
Reason (R): Inventories are shown as current assets because they are held to be realized at the earliest by the company. This is true.
Inventory is the asset held for sale in normal routine operations; therefore, inventory is considered a current asset because the company intends to process and sell the inventory within twelve months from the reporting date or, more precisely, within the next accounting year. All inventories are always treated as current.