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CMA Intermediate · Corporate Accounting and Auditing · Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013)

Under Schedule III Division II, a company has total current assets of Rs 90 lakh, of which Rs 10 lakh is investments held for more than 12 months from the reporting date and classified wrongly as current, and Rs 15 lakh is inventory expected to be sold within the operating cycle of 18 months but over 12 months. The company's normal operating cycle is 18 months. What is the correct current assets figure?

The correct figure is Rs 80 lakh. The long-held investments of Rs 10 lakh are reclassified as non-current, while inventory stays current because it will be realised within the company's 18-month operating cycle. Therefore 90 minus 10 equals 80.

  1. ARs 90 lakh
  2. BRs 80 lakhCorrect
  3. CRs 75 lakh
  4. DRs 65 lakh

Explanation

The operating cycle of 18 months is the basis, so inventory of Rs 15 lakh stays current. The investments of Rs 10 lakh are not expected to be realised within the operating cycle and are not held for trading, so they are non-current. Current assets are 90 minus 10, which is Rs 80 lakh. Option C wrongly removes the inventory using a 12-month rule.

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