Which item is shown as a current asset in a sole trader's statement of financial position?
Correct answer: A. Trade receivables
- A. Trade receivables
- B. Long-term bank loan
- C. Owner's capital
- D. Accumulated depreciation
Explanation
Trade receivables are amounts due from customers and are normally expected to be collected in the operating cycle. A long-term loan is a liability, while capital and accumulated depreciation are not current assets.
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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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