How will you classify, if the operating cycle of the company is 10 months and the expected period of payment of trade payables is 12 months?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Current Liability.
The period of the operating cycle is irrelevant if the expected period is less than or up to 12 months. Here, trade payables are paid so it is liability. So, it is a current liability.