The classification of assets into current or non-current in the statement of financial position will provide useful information on the short-term solvency of the entity:
A) when the entity supplies goods or services within a clearly identifiable normal operating cycle.
B) when the operating cycle of the entity is greater than 12 months.
C) when the operating cycle of the entity is less than 12 months.
D) when the entity is a financial institution.

Question

Quizplus · Accepted Answer

The classification of assets into current or non-current is particularly useful for entities with a clearly identifiable normal operating cycle, as it helps assess short-term solvency by distinguishing between assets that will be converted to cash within the operating cycle and those that will not.

The Classification of Assets into Current or Non-Current in the Statement