Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Classified Balance Sheet Components

Financial Accounting

2. Transaction Analysis

Classified Balance Sheet Components

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Multiple Choice

Why are short-term receivables listed after short-term investments on a classified balance sheet?

Because receivables are classified as non-current assets.

Because short-term investments are generally more liquid than receivables.

Because receivables are considered more reliable than investments.

Because investments are reported after all current assets.

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Verified step by step guidance

Understand the concept of liquidity: Liquidity refers to how quickly an asset can be converted into cash without significant loss of value. Short-term investments are generally more liquid than receivables because they can often be sold or redeemed for cash immediately.

Review the structure of a classified balance sheet: A classified balance sheet organizes assets into categories based on their liquidity and usability. Current assets are listed in order of liquidity, starting with the most liquid assets like cash and cash equivalents.

Recognize the placement of short-term investments: Short-term investments are listed after cash and cash equivalents because they are highly liquid and can be converted into cash quickly, often within a few days or weeks.

Understand the placement of receivables: Receivables, such as accounts receivable, are listed after short-term investments because they are less liquid. Receivables require collection efforts and may take longer to convert into cash compared to short-term investments.

Conclude why short-term receivables are listed after short-term investments: The order reflects the relative liquidity of the assets, with short-term investments being more liquid than receivables. This ensures the balance sheet provides a clear and logical presentation of current assets based on their liquidity.