Which one of the following assets may be classified as a non-current asset in the accounts of a business?Group of answer choicesA. A fridge in the staff kitchenB. A tax refund due next yearC. A machine on hire from another companyD. A hire purchase creditor
Question
Which one of the following assets may be classified as a non-current asset in the accounts of a business?Group of answer choicesA. A fridge in the staff kitchenB. A tax refund due next yearC. A machine on hire from another companyD. A hire purchase creditor
Solution
The correct answer is A. A fridge in the staff kitchen.
Here's why:
A non-current asset is a term used in accounting for assets and liabilities, meaning they are long-term. Non-current assets are expected to bring economic benefit to the entity for more than one year.
A. A fridge in the staff kitchen - This is a non-current asset because it is a long-term asset that the company uses in its day-to-day operations and is not expected to be converted into cash within one year.
B. A tax refund due next year - This is a current asset because it is expected to be received within one year.
C. A machine on hire from another company - This is not an asset at all because the company does not own it.
D. A hire purchase creditor - This is a liability, not an asset, because it represents an amount the company owes.
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