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CA Intermediate · Advanced Accounting · Framework for Preparation and Presentation of Financial Statements

Sagar Foods Ltd. has the following at year end: a trade receivable of Rs 5,00,000 that is expected to be collected in 45 days; a plant acquired for use over 8 years; a raw material stock of Rs 2,00,000 expected to be consumed in production within 3 months (operating cycle 4 months); and a fixed deposit of Rs 3,00,000 maturing in 18 months. What is the total of the items that would be classified as current assets under the framework of classification used in Schedule III?

The current assets total Rs 7,00,000, being receivables of Rs 5,00,000 plus raw material of Rs 2,00,000. Both are realised or consumed within the operating cycle. The plant is a long-term asset and the fixed deposit maturing in 18 months exceeds twelve months, so both are non-current.

  1. ARs 10,00,000
  2. BRs 7,00,000Correct
  3. CRs 5,00,000
  4. DRs 8,00,000

Explanation

Receivable (5,00,000) is realised within the operating cycle and the stock (2,00,000) is consumed within it, so both are current: total 7,00,000. Plant is non-current. The fixed deposit maturing in 18 months is beyond 12 months, so it is non-current; including it would give 10,00,000, which is wrong.

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