CMA Intermediate · Financial Accounting · Final Accounts of Commercial Organisations
Under the Indian presentation format for a company's balance sheet, which of the following items is classified as a current asset?
Prepaid insurance for the next four months is a current asset because its benefit will be consumed within twelve months of the balance sheet date. The machinery advance, long-term deposit and goodwill are all non-current items.
- AAdvance paid to a supplier for purchase of machinery due after 3 years
- BSecurity deposit with an electricity board refundable after 5 years
- CPrepaid insurance premium for the next 4 monthsCorrect
- DGoodwill acquired on purchase of a business
Explanation
Prepaid insurance for the next 4 months will be consumed within twelve months, so it is a current asset. Capital advances and long-term deposits are non-current, and goodwill is an intangible non-current asset.
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