The primary basis for the classification of assets and liabilities in the balance sheet is:
A) profitability.
B) liquidity.
C) age.
D) value.

Question

Quizplus · Accepted Answer

The primary basis for the classification of assets and liabilities in the balance sheet is liquidity, which refers to an entity's ability to meet its financial obligations as they come due. Assets and liabilities are listed in order of their expected conversion to cash. This allows users of financial statements to assess the entity's ability to meet its short-term obligations and to make informed investment and lending decisions.

The Primary Basis for the Classification of Assets and Liabilities