Answer to Question #244193 in Accounting for nicole

Question

4. If the normal operating cycle is 8 months to August 30, 2023, and the 12 months after the reporting period will jump to the date of December 31, 2023, when is the threshold of

proving that the asset or liability is current? (Pick between August 30, 2023, and December 31, 2023,) Explain your position.

Answer 1

Solution:

An asset or liability is considered current if it falls within one year and non-current if it is beyond a year.

A current asset is an account that can be converted into cash within one year, while a current liability is an account whose payment would be done within one year.

Therefore, if the asset or liability falls between 1^st January 2023 and December 31^st 2023, then it will be considered a current asset or liability.