Question : Which of the following statements is incorrect?
Option 1: Only those assets which are expected to be realized within a year should be included in current assets.
Option 2: Those liabilities, which are expected to be paid within a year, should be included in current liabilities. Those long-term loans and debentures, which will be due for payment within one year, are also included in current liabilities.
Option 3: Loose Tools, Patents, Goodwill, Trade Marks and Computer Software are not included in current assets.
Option 4: Bank Overdrafts should not be included in current liabilities.
Correct Answer: Bank Overdrafts should not be included in current liabilities.
Solution : Answer = Bank Overdrafts should not be included in current liabilities.
Bank overdraft is a part of current liabilities. Bank overdrafts are typically classified as current liabilities since they are repayable on demand or within a short timeframe, making them a part of the company's short-term obligations . Hence, the correct option is 4.
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