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
Ask the Tutor ACCA FA
Loan
5y ago#1I 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
5y ago#3Correct - this question is nothing to do with accruals and prepayments. It is purely asking about the presentation on the SOFP.
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