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

A classified balance sheet lists assets in order of their:

alphabetical order

market value

historical cost

liquidity

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Verified step by step guidance

Understand the concept of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into specific categories to provide clarity and insight into the financial position of a company.

Focus on the asset section: Assets are typically divided into current assets and non-current assets. Current assets are those expected to be converted into cash or used up within one year, while non-current assets are long-term resources.

Learn the principle of liquidity: Liquidity refers to the ease with which an asset can be converted into cash. Assets are listed in order of liquidity, starting with the most liquid (e.g., cash) and moving to less liquid assets (e.g., property, plant, and equipment).

Review examples of asset ordering: For instance, cash is listed first because it is the most liquid asset, followed by accounts receivable, inventory, and then long-term assets like buildings and equipment.

Apply this knowledge to the problem: The correct answer is liquidity because classified balance sheets prioritize the arrangement of assets based on their liquidity rather than alphabetical order, market value, or historical cost.