Question

In a balance sheet, the assets and liabilities are arranged in the order of ___________.

• A. Randomly
• B. Permanence
• C. Order of liquidity
• D. Both B and C

Answer 1

The correct option is D Both B and C

The assets and the liabilities must be marshalled properly based on the requirement. There are two ways of presenting the assets and liabilities of the business.

Order of Liquidity: According to this, assets are arranged in the order of ease with which they can be converted in to cash and liabilities in the order in which they are to be discharged.

Order of liquidity

Liabilities Assets

Bills Payable Cash on Hand

Trade Creditors Cash at Bank

Loans Govt Securities

Outstanding Expenses Other Investments

Reserves & Surpluses Bills Receivables

Capital Sundry Debtors

Inventory

Furniture

Plant & Machinery

Land & Building

Order of Permanence: When items are arranged according to the the fixity or permanence, assets and liabilities are shown first, and then are listed floating assets and liabilities. On the liabilities side, the liabilities which will have to be discharged last.

Liabilities Assets

Capital Land & Building

Reserves & Surpluses Plant & Machinery

Outstanding Expenses Furniture

Loans Inventory

Trade creditors Sundry Debtors

Bills payable Bills Receivables Other Investments Govt Securities

Cash at Bank

Cash on Hand