Question

1. Complete the following table showing whether the mentioned item is a non- current asset, current asset or liability.

	Non-Current Assets	Current Assets	Liabilities
a) Furniture
b) Accounts receivables
c) Motor vehicles
d) Inventory
e) Accrued rentals

Answer 1

	NCA	CA	Liabilities
Furniture	✓	×	×
Account receivable	×	✓	×
Motor vehicle	✓	×	×
Inventory	×	✓	×
Accrued rental	×	×	✓

Below down are the reason why these item are classified under different headings

A) Furniture

Its a Non - Current Asset because these have life for more than 12 months or one operating cycle and can't be used for liquidity for short term purpose.

B) Account Receivable

Accounts Receivable (AR) is the proceeds or payment which the company will receive from its customers who have purchased its goods & services on credit. Usually the credit period is short ranging from few days to months or in some cases maybe a year.

Account Receivables (AR) are treated as current assets on the balance sheet.

C) Motor vehicle

A long-term asset account that reports a company's cost .The account is reported under the balance sheet under Non - current asset classified under plant, and equipment. Vehicles are depreciated over their useful lives.

D) Inventory

The cost of the merchandise purchased but not yet sold is reported in the account Inventory or Merchandise Inventory.

Inventory is reported as a current asset on the company's balance sheet. Inventory is a significant asset that needs to be monitored closely.

E) Accrued rental

Accrued rent is the amount of rent that has not yet been paid by the tenant or received by the landlord for a past period of time.

The Accrued Rent (Payable) will be treated as a current liability and will be disclosed on the Liabilities side of Balance Sheet under the subheading Other Current Liabilities of heading Current Liabilities.