18 Lecture - Long Term Deposits and Prepayments & Current Assets

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18 Lecture

MGT401

Midterm & Final Term Short Notes

Long Term Deposits and Prepayments & Current Assets

Long-term deposits and prepayments are assets that a company receives or makes in advance of their use or delivery. These assets are typically held for more than one year and are reported as long-term assets on the balance sheet. In contrast, cu


Important Mcq's
Midterm & Finalterm Prepration
Past papers included

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  1. Which of the following is an example of a long-term deposit? a. Accounts receivable b. Inventory c. Property, plant, and equipment d. Cash in the bank Answer: c

  2. Long-term deposits are typically held for how long? a. Less than one year b. One to three years c. More than three years d. It depends on the nature of the deposit Answer: c

  3. Prepaid expenses are an example of which type of asset? a. Long-term asset b. Current asset c. Non-current asset d. Intangible asset Answer: a

  4. Which of the following is an example of a current asset? a. Land held for investment purposes b. A building owned by the company c. Accounts payable d. Patents and trademarks Answer: c

  5. Cash and cash equivalents are an example of which type of asset? a. Long-term asset b. Current asset c. Fixed asset d. Intangible asset Answer: b

  6. Which of the following is an example of a prepayment? a. Rent paid in advance b. Salary paid to an employee c. Interest received from a bank d. Sales revenue earned from customers Answer: a

  7. Current assets are important for a company because they help to: a. Increase the value of the company b. Support ongoing operations c. Generate long-term revenue d. Pay off long-term debts Answer: b

  8. Which of the following is an example of a non-current asset? a. Inventory b. Cash in the bank c. Land held for investment purposes d. Accounts payable Answer: c

  9. Which of the following is an example of a long-term deposit? a. Payment made for inventory b. Payment made for a loan c. Payment made for property taxes d. Payment made for advertising expenses Answer: b

  10. Which of the following is an example of a current asset? a. Machinery owned by the company b. Patent owned by the company c. Inventory held for sale d. Land held for investment purposes Answer: c



Subjective Short Notes
Midterm & Finalterm Prepration
Past papers included

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  1. What is the difference between a long-term deposit and a current asset? Answer: Long-term deposits are assets that are held for more than one year, while current assets are expected to be used or sold within one year.

  2. What is an example of a prepayment? Answer: An example of a prepayment is rent paid in advance.

  3. Why are current assets important for a company? Answer: Current assets are important for a company because they help to support ongoing operations.

  4. What is the difference between a current asset and a non-current asset? Answer: Current assets are expected to be used or sold within one year, while non-current assets are held for more than one year.

  5. What is an example of a long-term deposit? Answer: An example of a long-term deposit is a payment made for a loan.

  6. What is an example of a non-current asset? Answer: An example of a non-current asset is land held for investment purposes.

  7. What is the purpose of prepayments? Answer: Prepayments are made to ensure that an expense will be covered in advance of its actual occurrence.

  8. How are long-term deposits reported on the balance sheet? Answer: Long-term deposits are reported as a long-term asset on the balance sheet.

  9. What is the purpose of current assets? Answer: Current assets are used to support ongoing operations of a company.

  10. What is an example of a current asset? Answer: An example of a current asset is inventory held for sale.

Long-term deposits are assets that are held for a period of more than one year. These deposits can include investments in bonds, certificates of deposit, and long-term loans. They are typically held to earn interest or as a means of generating income in the long run. Long-term deposits are reported as a long-term asset on the balance sheet. Prepayments are payments made in advance for goods or services that will be received in the future. An example of a prepayment is rent paid in advance. Prepayments are considered assets because the payment has been made in advance of the receipt of the goods or services. Prepayments are reported as a current or non-current asset, depending on when the payment will be utilized. Current assets are assets that are expected to be used or sold within a year. They are typically used to support the ongoing operations of a company. Examples of current assets include cash and cash equivalents, accounts receivable, and inventory held for sale. Current assets are reported on the balance sheet at their net realizable value. The importance of current assets lies in their ability to provide liquidity to a company. Companies need to have enough current assets to cover their short-term liabilities, such as accounts payable and short-term loans. A lack of current assets can indicate financial distress and may result in difficulty paying off short-term debts. Overall, long-term deposits, prepayments, and current assets are all important components of a company's financial statements. They provide insight into a company's liquidity and financial health, and can be used to make informed decisions about investments and operations.

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