Asked by Luthando Bongobi on Jul 03, 2024
Verified
Assets are reported on the balance sheet in the order of liquidity.
Assets
Economic resources or items of value owned by an individual or organization, including tangible and intangible resources, that can be used to produce positive economic value.
Liquidity
The ease with which an asset or security can be converted into ready cash without affecting its market price.
Balance Sheet
A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.
- Grasping the implications of liquidity and the order of asset reporting on the balance sheet.
Verified Answer
ZK
Zybrea KnightJul 06, 2024
Final Answer :
True
Explanation :
Assets on the balance sheet are reported in order of their liquidity, meaning that the most liquid assets, such as cash and cash equivalents, are listed first, followed by short-term investments, accounts receivable, inventory, and then long-term assets such as property and equipment. This order allows readers of the balance sheet to see the company's most liquid assets first, providing a snapshot of the company's ability to pay its debts and meet its financial obligations in the short-term.
Learning Objectives
- Grasping the implications of liquidity and the order of asset reporting on the balance sheet.