Explain the Current and Noncurrent Classification of liabilities.
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
Explain the Current and Noncurrent Classification of liabilities.
Lets undesand the basics.
Balance sheet is mainly divided into three parts which are,
(1) Assets
(2) Equity
(3) Liabilities
These three sections are also divided into various types which are,
Assets are divided into current assets and non current assets.
Liabilities are divided into current liability and non current liabilities.
Equity are not divided into further subsections.
So here in this case as per IAS 1,
An entity classify the liability as current when,
(I) Liability expected to be settled in normal operating cycle. Operating cycle can be differ business by business.
(II) Liability is related to primarily for the purpose of trading.
(III) Liability is expected to be settled with in the period of 12 months from the reporting period
(IV) Liability should not have unconditional right to defer settlement of liabilities for at least twelve month after the reporting period.
However if any one above criteria is not met then a liabilities is classified as non current liabilities.
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