ACCA Applied Knowledge · Financial Accounting · Statement of financial position
In preparing a statement of financial position from a trial balance, which of the following balances would be classified as a current liability?
A bank overdraft repayable on demand is a current liability because it is an obligation settled within the operating cycle or twelve months. Share premium and retained earnings are equity items, and accumulated depreciation is a deduction from non-current assets, so none of those are current liabilities.
- ABank overdraft repayable on demandCorrect
- BShare premium account
- CRetained earnings
- DAccumulated depreciation on plant
Explanation
A bank overdraft repayable on demand is a liability due within twelve months, so it is current. Share premium and retained earnings are equity. Accumulated depreciation is deducted from non-current assets, not shown as a liability.
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