The classification of assets into current or non-current in the balance sheet 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.
E) None of the given answers.

Question

Quizplus · Accepted Answer

The classification of assets into current or non-current is particularly useful for assessing short-term solvency when the entity has a clearly identifiable normal operating cycle, as it helps in understanding the timing of cash flows related to operating activities.

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