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Home Questions W44H9RQRNB
Target Exam

CUET

Subject

Accountancy

Chapter

Financial Statements of a Company

Question:

Which among the following is a current liability?

  Operating cycle in months Expected period when payment is made
A 9 12
B 11 12
C 11 13
D 18 20
E 18 16
F 10 12
Options:

ABCD

CDEF

ABEF

EF

Correct Answer:

ABEF

Explanation:

The correct answer is option 3- ABEF.

  Operating cycle in months Expected period when payment is made Liability
A 9 12 Current as operating cycle is 9 months. Liability is current because expected period is within 12 months.
B 11 12 Current as it is paid within 12 months.
C 11 13 Non-current as it is paid after 12 months
D 18 20 Non-current as it is paid after 12 months and operating cycle.
E 18 16 Current as it is paid within operating cycle.
F 10 12 Current as it is paid within 12 months.

* A liability is treated as current if payment is made within operating cycle or 12 months.

** Where operating cycle is less than 12 months then liability is current if it is within 12 months.

** Where operating cycle is more than 12 months, operating cycle and payment period is compared. If the payment period is within operating cycle then it is current liability otherwise it is non current liability .

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