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Sir I would like to why this point makes recognition of asset and corresponding liability valid. “Daley Co makes a substantial interest free deposit based on the number of cars held”
My book gives reason for this but I couldn’t really get it.It’s inventory held by us on behalf of the manufacturer so it’s a liability
It’s money paid by us to the manufacturer that the manufacturer owes us so it’s an asset
Does that coincide with the answer that you read?
Oh okay.
Umm..It says the dealership is effectively foregoing the interest which could be earned on the cash sum
So? Does that explain why it’s either an asset or a liability?
I don’t see the relevance of the comment. Sorry
Sir the question is actually asking whether based on point given the dealership(Daley Co) should recognise the asset (the cars from the manufacturer) and a corresponding liability to the manufacturer(trade payable). And for that point they just gave the above reason with a yes.
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