PRC-1 · Chapter 4 · Question 43 of 100
'Starlight Corp' paid an advance salary of Rs. 40,000 to an employee in December for the upcoming month of January. How should this be classified in the December 31 statement of financial position?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Current Asset
Explanation
Advance salary paid to an employee represents an economic benefit the business will receive in the future (the employee's work). It is a prepaid expense, which is classified as a current asset.
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