Question

Current assets are economic resources that are expected to be converted to cash or used up by the business within one year or the normal operating cycle, whichever is shorter.
A. True
B. False

Answer 1

Answer:

Statement is false

Explanation:

Current assets are economic resources of the organization that are usually used up within one year to carry out the operations. However, if the operating cycle is more than one year, then the asset that gets used up within that period is considered as current asset. Operating cycle is the time period taken to invest cash, produce goods, sell them and receive money from customers against goods sold. Operating cycle need not be limited to one year.

So, asset that gets used up within operating cycle is termed current asset.