QUESTION 1 A trader buys goods but the payment is deferred past the date on which the physical assets are transferred. Does the transaction give rise to any financial instrument?


Yes, the transaction gives rise to a financial instrument known as a trade payable or accounts payable. This is a liability for the trader and represents the amount owed to the supplier for the goods purchased. The trade payable is recorded as a financial liability in the balance sheet of the trader until it is settled. The settlement could be made in cash or other financial instruments such as a promissory note, which would then give rise to a new financial instrument.

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