Explanation
Provision for Doubtful Debts means the expense reported on the income statement or profit and loss A/c. If Provision for Doubtful Debts is the current period expense associated with the losses from normal credit sales, it will appear as an operating expense usually as part of Selling, General and Administrative Expenses (SG&A). If a provision for doubtful debts would decrease then debit balance of profit and loss A/c would decrease and ultimately net profit would increase.
Prepaid expenses are treated as an asset for the business. Examples – Prepaid salary, prepaid rent, prepaid subscription, etc. They are also known as unexpired expenses or expenses paid in advance. When they appear in the trial balance, it implies that no further adjustment is needed in them.
Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period. This includes Raw material, work in process, and finished goods inventory. The amount of closing stock can be ascertained with a physical count of the inventory. It can also be determined by using a perceptual inventory system and cycle counting to continually adjust inventory records to arrive at ending balances.
The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation:
Opening stock + Purchases - Closing stock = Cost of goods sold
A current asset is an asset that a company holds and can be easily sold or consumed and further lead to the conversion of liquid cash. For a company, a current asset is an important factor as it gives them a space to use the money on a day-to-day basis and clear the current business expenses. In other words, the meaning of current assets can be explained as an asset that is expected to last only for a year or less is considered as current assets.For example: Sundry debtors, Stock, Prepaid insurance etc.Therefore, D is the correct answer.
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