Identification of Types of Assets And Liabilities - SS1 Accounting Past Questions and Answers - page 1
What are current assets?
Assets that can be easily converted into cash within a year
Long-term assets that a company owns and uses to generate income
Assets that have no physical form
Assets that represent investments or financial claims
What are fixed assets?
Assets that can be easily converted into cash within a year
Long-term assets that a company owns and uses to generate income
Assets that have no physical form
Assets that represent investments or financial claims
What are current liabilities?
Short-term debts that a company owes and must pay within a year
Debts that a company owes and must pay back over a period of more than one year
Liabilities that may arise in the future, depending on the outcome of certain events
Liabilities that represent the capital that a company has raised from investors
What are long-term liabilities?
Short-term debts that a company owes and must pay within a year
Debts that a company owes and must pay back over a period of more than one year
Liabilities that may arise in the future, depending on the outcome of certain events
Liabilities that represent the capital that a company has raised from investors
What are contingent liabilities?
Short-term debts that a company owes and must pay within a year
Debts that a company owes and must pay back over a period of more than one year
Liabilities that may arise in the future, depending on the outcome of certain events
Liabilities that represent the capital that a company has raised from investors
Why is it important for a company to have a mix of different types of assets?
It is important for a company to have a mix of different types of assets because this can help to reduce risk and maximize returns. For example, having a mix of current and fixed assets can help a company maintain liquidity while also generating long-term income.
What is the difference between current and long-term liabilities?
Current liabilities are short-term debts that a company owes and must pay within a year, while long-term liabilities are debts that a company owes and must pay back over a period of more than one year. Current liabilities are typically related to day-to-day operations, while long-term liabilities are related to major investments and financing decisions.