A draft statement of financial position has been prepared for Lollipop, a sole trader. It is now discovered that a loan due for repayment by Lollipop 14months after reporting date has been included in the trade payables.
What is the necessary adjustment?
1- no effect on net current asset
2-inc net current asset
3-reduce net current asset
4-inc current asset but reduce net current asset
Why is the answer b?
loan represents ncl and payables is cl so how does current asset get affected?
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Financial statements
5y ago#1The question says that they have included it in trade payables.
They should not have included it in trade payables and so when it is corrected, payables reduce and therefore net current assets increase.
Hi John,
For this question, what would the adjustment be? I thought it would be removed from Trade payables but still within Current Liabilities as it is now due for repayment.
So essentially no change in net assets?
3y ago#3It is more than one year from the date of the financial statements and is therefore a non-current liability (not a current liability).
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