Which of the following statements MOST precisely describes a classified balance sheet?
A) Accounts are classified by their purchase dates.
B) Account balances are listed from the highest amount to the lowest amount.
C) Assets are listed in their order of liquidity.
D) Assets are listed in alphabetical order.

Question

Quizplus · Accepted Answer

A classified balance sheet categorizes assets and liabilities into subgroups based on their nature, function or order of liquidity. The order of liquidity means that the assets are listed from the most liquid (i.e. cash and cash equivalents) to the least liquid (i.e. long-term investments). This arrangement provides an idea of the company's ability to generate cash in the short term to meet its obligations.

Which of the Following Statements MOST Precisely Describes a Classified