CA Foundation · Accounting · Final Accounts of Sole Proprietors
In the balance sheet of a sole proprietor prepared as per the usual Foundation-level presentation, which of the following is classified as a current asset?
Prepaid insurance is a current asset because it represents an amount paid in advance whose benefit will be used up within the next accounting period. Goodwill, furniture and long-term loans given are non-current assets, since they are held for use or recovery over a longer period.
- APrepaid insuranceCorrect
- BGoodwill
- CFurniture and fittings
- DLong-term loan given to a relative
Explanation
Prepaid insurance is an expense paid in advance whose benefit will be received within the next twelve months, so it is a current asset. Goodwill is an intangible fixed asset, furniture is a tangible fixed asset, and a long-term loan given is a non-current asset.
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