Current assets are those assets which get converted into cash within
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 01 year
Option (1) 6 year — Incorrect. Assets that stay for more than one year are fixed assets.
Option (2) 3 year — Incorrect. Assets that stay for more than one year are fixed assets.
Option (3) 01 year — Correct. Current assets are those assets which, in the normal routine of the business, get converted into cash or cash equivalents within one year. Examples are inventories, debtors and bills receivable.
Option (4) 2 year — Incorrect. Assets that stay for more than one year are fixed assets.
NCERT (2026-27 Edition): “Meaning … Fixed assets are those which remains in the business for more than one year, usually for much longer, e.g., plant and machinery, furniture and fixture, land and building, vehicles, etc. Decision to invest in fixed assets must be taken very carefully as the investment is usually quite large. Such decisions once taken are irrevocable except at a huge loss. Such decisions are called capital budgeting decisions. Current assets are those assets which, in the normal routine of the business, get converted into cash or cash equivalents within one year, e.g., inventories, debtors, bills receivables, etc.” |