CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship
Which one of the following is classified as a current asset in the balance sheet of a trader?
Prepaid insurance is a current asset because the service paid for will be used up within the operating year. Furniture and goodwill are fixed assets, and a loan recoverable after five years is non-current, so they are not current assets.
- AFurniture used in the shop
- BGoodwill purchased
- CPrepaid insuranceCorrect
- DLoan given to a friend repayable after five years
Explanation
Prepaid insurance represents a benefit that will be consumed within the year, so it is a current asset. Furniture is a fixed asset, purchased goodwill is an intangible fixed asset, and a loan repayable after five years is a long-term (non-current) asset.
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