B) Discussion and Analysis

Creative Ltd is a graphics arts design consulting company. Bianca, its finance controller has prepared a Balance Sheet as at 31 December 2019, the end of the financial year. This balance sheet will be submitted with Creative Ltd’s loan application to Ocean Union Bank.

In the Current Assets section of the balance sheet, Bianca reported an $80,000 receivable from Ibrahim, the Managing Director of Creative Ltd, as a trade account receivable. Ibrahim borrowed the money from Creative Ltd in November 2016 for a down payment on a new residential apartment. He has verbally assured Bianca that he will repay the account receivable within the next year. Bianca reported the $80,000 in the same manner on the preceding year’s balance sheet.

Required:

Evaluate whether it is acceptable for Bianca to prepare the year end balance sheet as at 31 December 2019 in the manner indicated above.