Use the following information to answer the question $ Trade creditors (31/12/2020) 4,000 Paid for
Use the following information to answer the question
| $ | |
Trade creditors (31/12/2020) | 4,000 |
| Paid for purchases in 2021: Cheques | 110,000 |
| Carriage inwards | 1,000 |
| Trade creditors (31/12/2021) | 6,000 |
The balance c/d on trade creditors will be recorded in the balance sheet as
- A. current asset
- B. short-term liability
- C. long-term liability
- D. fixed asset
Correct Answer: B. short-term liability
Explanation
The balance c/d on trade creditors will be recorded in the balance sheet as a short-term liability.
Trade creditors represent amounts owed by a business to its suppliers for goods or services that have been purchased on credit. These amounts are typically expected to be paid within a short period, usually within a year. As a result, trade creditors are classified as short-term liabilities on the balance sheet.
In the given information, the trade creditors balance on December 31, 2021, is $6,000. This represents the amount that the business still owes to its suppliers at the end of the year. Since it is an amount payable in the short term, it will be recorded as a short-term liability on the balance sheet.