8.1

(a) Distinguish between current liabilities and non-current liabilities. Name and briefly describe three items belonging to each category.

(b) Why do the income taxes charged to an income statement not equal the profit multiplied by the current rate of income tax?

(c) At the balance sheet date, a private high school has lost a court case for an uninsured football injury. The amount of damages has not been set. A reasonable estimate is between EUR 500,000 (minimum) and EUR 900,000

(maximum). How should this information be presented or accounted for in the financial statements?

(d) Why would a lender want to add a covenant to a loan contract concerning a maximum debt-to-total assets ratio?