Practicing Success
There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below. Assertion (A): Goods sold on a credit period of 36 months will be shown as Other Current Assets if the Operating Cycle Period is more than 36 months. |
Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A). Both Assertion (A) and Reason (R) are not correct. Only Assertion (A) is correct. |
Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A). |
The operating cycle, also known as the cash cycle of a company, is an activity ratio measuring the average period required for turning the company’s inventories into cash. This process of producing or purchasing inventories, selling finished goods, receiving cash from customers, and using that cash to purchase/produce inventories again is a never-ending cycle, as long as the company remains in operation. |