Sitara Textile is one of the renowned textile companies in Pakistan. It has a strong supply chain network of raw material since its establishment in order to fulfill its customers demand on time. ABC Co. one of the raw material suppliers of Sitara Textile is in short financing and need Rs. 500,000 to enhance its production facility. ABC Co. requests Sitara Textile to lend the required amount for the period of 3 years. Sitara Textile agrees and guaranteed ABC Co. the loan on certain basis for the said period.
Question
Your comments require in this regard whether Sitara Textile would disclose this financial information while preparing financial statements, which will publish later? Your answer must be confined in two to three lines.
Solution idea:-
Sitara Textile will disclose the information about the loan in financial statement which is given to ABC Co. Because there is no any negetive effect of disclosing the information of debt in financial statement it will increases the assets of the Sitara Textile and which increases the financial position of the Sitara Textile. And the supply chain network of raw material will also become more strong.
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