Which item is normally presented under current liabilities in a sole trader's statement of financial position?
Correct answer: B. Bank overdraft
- A. Trade receivables
- B. Bank overdraft
- C. Prepaid insurance
- D. Office equipment
Explanation
A bank overdraft is normally repayable on demand and is therefore shown as a current liability. Trade receivables and prepaid insurance are current assets, while office equipment is a non-current asset.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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