Question

Arrange the following gases in the order of liquidity in balance sheet

Answer 1

Explanation:

Order of liquidity is the presentation of asset in the balance sheet in the order of the amount of the time it would take to convert them into cash. Thus cash is presented first. After that debtors, then stock comes.

Debtors generally takes 2 to 3 months for payment. Stock requires multiple months to convert to cash. Stock is sometimes sold for credit. That's why it comes after debtors. Buildings are purchased for a long period of time.

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