Current assets are resources convertible to cash within one year

Steps:

• Recall current assets include cash, receivables, inventory, and prepayments expected to benefit within 12 months.
• Classify each option: liabilities are obligations, not assets.
• Identify inventory forms like work in progress as current assets.
• Eliminate options that represent debts or deferred revenues.

Why D is correct:

• Work in progress is unfinished inventory, per accounting standards (e.g., IAS 2), expected to convert to sales and cash within the operating cycle, typically one year.

Why the others are wrong:

• A: Bank overdraft is a short-term borrowing, classified as a current liability.
• B: Prepaid income is unearned revenue, a current liability until services are provided.
• C: Loan payable in 12 months meets the one-year threshold, making it a current liability.

Final answer: D