Accounting Online Program Certification Practice Test

What are the NCL and CL borrowing figures for the given financial data?

1. NCL £80,000, CL £20,000

2. NCL £20,000, CL £80,000

3. NCL £100,000, CL £30,000

4. NCL £30,000, CL £70,000

The correct answer is: NCL £80,000, CL £20,000

In accounting, the terms NCL (Non-Current Liabilities) and CL (Current Liabilities) refer to different categories of debt that a company has. Non-current liabilities are obligations that are due in more than one year, such as long-term loans or bonds payable, while current liabilities are obligations that are due within one year, like accounts payable or short-term loans. When analyzing financial data, distinguishing between these two types of liabilities is crucial for understanding a company’s short-term and long-term financial health. In the given scenario, the correct figures for NCL being £80,000 and CL being £20,000 indicates that the company has a substantial long-term obligation of £80,000, which may suggest that it is planning for future investments or expansions, while having a more manageable short-term obligation of £20,000. This correct categorization allows for a clearer assessment of the company’s liquidity and solvency. A greater NCL relative to CL may suggest that the company is strategically investing in long-term growth while maintaining only a small amount of immediate obligations, which can be a positive sign for investors and creditors. Understanding these figures allows stakeholders to make informed decisions regarding the financial stability and operational capacity of the business.