Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of Sole Proprietorship

In the balance sheet of a sole proprietor, which of the following is classified as a current asset?

Prepaid insurance is a current asset because it is an amount paid in advance whose benefit will be enjoyed within the next year. Goodwill and furniture are long-term assets, and a five-year bank loan is a liability rather than an asset.

  1. AGoodwill acquired two years ago
  2. BPrepaid insuranceCorrect
  3. CFurniture used in the office
  4. DLoan taken from a bank repayable in 5 years

Explanation

Prepaid insurance represents an expense paid in advance whose benefit will be received within the next accounting period, so it is a current asset. Goodwill is an intangible fixed asset and furniture is a fixed asset. The bank loan is a long-term liability, not an asset.

Did you get it right without looking?

One question tells you little. A timed set on Financial Statements of Sole Proprietorship shows your real accuracy, how long you take and where you lose marks.

Practise Financial Statements of Sole ProprietorshipFree diagnostic mock

More Financial Statements of Sole Proprietorship questions