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Good day to you
The following information is available about Andrew business as at 30/sep/2006
Loan(repayable in 4 equal instalments starting 1 Jan 2007). 100000
What are the correct figure for current asset or current liability
(note that what I have written is part of a question since i felt that this was part only was relevant to my doubt)
For the correct answer is an accrual of 25000
In my answer i didn’t assume it was a prepayment or an accrual that is relevant for this year but I thought of it as an prepayment that is relevant for the year of 2007
I thought since it paid in january 2007…i thought it is a prepayment(Relevant only for 2007)for the next year that covers till march 2007
However when I looked at the markscheme this 25000 was an a current liability so I assume this is an accrual for the 3 months from october to december
I also think that the information available for 30/sep/2006 is not the year end financial statement but 31/dec/2006 is actually the year end
I just wanted you to check whether my thought for this question is correct..please let me know whether it is correct or wrong
Thank you in advance
I need to see the whole question.
However, I would assume that the question says that the loan is repayable in 4 equal annual instalments, which means they repay 25,000 per year.
The first repayment is within 12 months of the date of the SOFP and is therefore a current liability. The remaining payments are all more than 12 months from the date of the SOFP and are therefore a non-current liability.
I do explain this in my free lectures.
Oh okay so 25000 per year is not relevant to accruals or prepayments I suppose
Also I have watched the free lectures on accrual and prepayments..I think I must watch it again because I’m really weak in this area of the syllabus
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