A current asset or liability must be sold or paid within how many months?

A current asset or liability must be sold or paid within how many months?

• A. Within 12 months
• B. Within 3 months
• C. Within 6 months
• D. Within 24 months

Answer: (A)

Current items are defined by the liquidity horizon: they are expected to be converted to cash or settled within 12 months. This 12-month threshold separates short-term (current) from longer-term (non-current) assets and liabilities. So, a current asset or liability is one that you expect to sell or pay within a year. Options that propose shorter timeframes (3 or 6 months) or a longer one (24 months) don’t align with this standard classification.

Current items are defined by the liquidity horizon: they are expected to be converted to cash or settled within 12 months. This 12-month threshold separates short-term (current) from longer-term (non-current) assets and liabilities. So, a current asset or liability is one that you expect to sell or pay within a year. Options that propose shorter timeframes (3 or 6 months) or a longer one (24 months) don’t align with this standard classification.