Classified Balance Sheet Components quiz #2 Flashcards
Classified Balance Sheet Components quiz #2
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How are patents classified on a balance sheet?
Patents are classified as long-term assets. What is the significance of the order of liquidity for current assets?
The order of liquidity shows which assets can be most quickly converted to cash to meet obligations. How are buildings classified on a classified balance sheet?
Buildings are classified as long-term assets. What does the classified balance sheet reveal about a company's obligations?
It reveals which obligations are due soon (current liabilities) and which are due later (long-term liabilities). How are accounts receivable classified on a balance sheet?
Accounts receivable are classified as current assets. What is the main advantage of using a classified balance sheet?
The main advantage is that it provides a clearer and more organized view of a company's financial position. How are land and machinery classified on a balance sheet?
Land and machinery are classified as long-term assets. What information does a classified balance sheet provide to investors?
It provides information about a company's liquidity, solvency, and overall financial structure. What is the main difference between current and long-term assets on a classified balance sheet?
Current assets are expected to be converted into cash within one year, while long-term assets are used for more than one year. In what order are current assets typically listed on a classified balance sheet, and why?
Current assets are listed in order of liquidity, starting with cash, then marketable securities, accounts receivable, inventory, and prepaid expenses, to show which assets can be most quickly converted to cash.
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