13 Lecture - Current Assets, Fourth Schedule - Companies Ordinance 1984

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13 Lecture

MGT401

Midterm & Final Term Short Notes

Current Assets, Fourth Schedule - Companies Ordinance 1984

The Fourth Schedule of the Companies Ordinance 1984 outlines the requirements for the presentation and disclosure of current assets in the financial statements of companies in Pakistan. Current assets include cash and cash equivalents, accounts


Important Mcq's
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  1. What are the components of current assets as per the Fourth Schedule of the Companies Ordinance 1984? A) Cash and cash equivalents B) Accounts receivable C) Inventory D) All of the above Answer: D) All of the above

  2. According to the Fourth Schedule of the Companies Ordinance 1984, which of the following assets are considered non-current assets? A) Land and buildings B) Long-term investments C) Patents and trademarks D) All of the above Answer: D) All of the above

  3. Under the Fourth Schedule of the Companies Ordinance 1984, how are current assets classified on the balance sheet? A) In order of liquidity B) In order of maturity C) In alphabetical order D) None of the above Answer: A) In order of liquidity

  4. Which of the following is an example of a cash equivalent as per the Fourth Schedule of the Companies Ordinance 1984? A) Accounts receivable B) Marketable securities C) Inventory D) Machinery and equipment Answer: B) Marketable securities

  5. What is the purpose of disclosing significant estimates or judgments made in determining the value of current assets? A) To ensure accurate financial reporting B) To comply with legal requirements C) To attract investors D) None of the above Answer: A) To ensure accurate financial reporting

  6. Which of the following is an example of an inventory as per the Fourth Schedule of the Companies Ordinance 1984? A) Land B) Buildings C) Raw materials D) None of the above Answer: C) Raw materials

  7. How often are companies required to present their financial statements as per the Fourth Schedule of the Companies Ordinance 1984? A) Annually B) Biannually C) Quarterly D) Monthly Answer: A) Annually

  8. What is the purpose of presenting current assets separately on the balance sheet? A) To facilitate analysis and decision-making B) To comply with legal requirements C) To avoid confusion D) None of the above Answer: A) To facilitate analysis and decision-making

  9. Which of the following is an example of an account receivable as per the Fourth Schedule of the Companies Ordinance 1984? A) Cash B) Inventory C) Advances to suppliers D) None of the above Answer: C) Advances to suppliers

  10. According to the Fourth Schedule of the Companies Ordinance 1984, what is the maximum time frame for an asset to be classified as a current asset? A) 6 months B) 1 year C) 2 years D) 5 years Answer: B) 1 year



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is the definition of current assets as per the Fourth Schedule of the Companies Ordinance 1984? Answer: Current assets are assets that are expected to be converted into cash within one year or the normal operating cycle of the business, whichever is longer.

  2. Why is it important for companies to present current assets separately on the balance sheet? Answer: Presenting current assets separately on the balance sheet allows for easier analysis and decision-making regarding a company's short-term liquidity and ability to meet its obligations.

  3. How are current assets classified on the balance sheet according to the Fourth Schedule of the Companies Ordinance 1984? Answer: Current assets are classified on the balance sheet in order of liquidity, with the most liquid assets presented first.

  4. What are examples of cash equivalents as per the Fourth Schedule of the Companies Ordinance 1984? Answer: Examples of cash equivalents include money market funds, treasury bills, and commercial paper.

  5. What is the purpose of disclosing significant estimates or judgments made in determining the value of current assets? Answer: Disclosing significant estimates or judgments helps to ensure the accuracy and reliability of a company's financial statements.

  6. How does the classification of assets as current or non-current impact a company's financial statements? Answer: The classification of assets as current or non-current impacts a company's liquidity ratios, working capital, and financial stability.

  7. What are the limitations of using the Fourth Schedule of the Companies Ordinance 1984 to classify current assets? Answer: The Fourth Schedule of the Companies Ordinance 1984 provides a general guideline for classifying current assets, but may not be suitable for all industries or business models.

  8. What is the impact of inventory valuation methods on the value of current assets? Answer: Different inventory valuation methods can result in different values for inventory, which can impact the total value of current assets.

  9. Why is it important for companies to accurately report their current assets on their financial statements? Answer: Accurate reporting of current assets is necessary for investors, creditors, and other stakeholders to make informed decisions about a company's financial health and future prospects.

  10. How can a company improve its management of current assets? Answer: A company can improve its management of current assets by implementing effective inventory management systems, improving cash flow management, and reducing the average collection period for accounts receivable.

The Fourth Schedule of the Companies Ordinance 1984 provides guidance on the classification of current assets on the balance sheet. Current assets are assets that are expected to be converted into cash within one year or the normal operating cycle of the business, whichever is longer. The purpose of presenting current assets separately on the balance sheet is to provide transparency and allow for easy analysis of a company's short-term liquidity. Current assets are classified on the balance sheet in order of liquidity, with the most liquid assets presented first. Cash and cash equivalents, such as money market funds, treasury bills, and commercial paper, are presented first, followed by short-term investments, accounts receivable, inventory, and prepaid expenses. It is important for companies to accurately report their current assets on their financial statements as it is a key indicator of their short-term financial health and ability to meet their obligations. Accurate reporting of current assets is necessary for investors, creditors, and other stakeholders to make informed decisions about a company's financial health and future prospects. However, the Fourth Schedule of the Companies Ordinance 1984 provides a general guideline for classifying current assets, and may not be suitable for all industries or business models. In addition, different inventory valuation methods can result in different values for inventory, which can impact the total value of current assets. To improve management of current assets, companies can implement effective inventory management systems, improve cash flow management, and reduce the average collection period for accounts receivable. Accurate reporting and effective management of current assets can help ensure a company's short-term financial stability and pave the way for long-term growth and success.

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