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Question
Arrangement of balance sheet in a proper way is known as __________.
Arrangement of balance sheet in a proper way is known as __________.
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Solution
The correct option is A marshalling of balance sheet
Assets and Liabilities are to be shown in the balance sheet either in permanency order or liquidity order. This is called marshaling of balance sheet.
Order of permanency is that where the assets and liabilities are shown as per their permanency in the business. For example, in assets side, fixed assets are shown first staring from Land & Building, Plant & Machinery , Furniture and Fixtures and than current assets.
Liquidity Order- In this order, assets are liabilities are shown as per their liquidity. In such case, cash and bank is the starting point of assets side, It is just reversed of the permanency order.
Assets and Liabilities are to be shown in the balance sheet either in permanency order or liquidity order. This is called marshaling of balance sheet.
Order of permanency is that where the assets and liabilities are shown as per their permanency in the business. For example, in assets side, fixed assets are shown first staring from Land & Building, Plant & Machinery , Furniture and Fixtures and than current assets.
Liquidity Order- In this order, assets are liabilities are shown as per their liquidity. In such case, cash and bank is the starting point of assets side, It is just reversed of the permanency order.
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