Question

Brainliest chance

Solve balance sheet prepare given balance. What is meant by in order of permanence and order of liquidity?

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Answer 1

ANSWER :

Balance Sheet in order of permanence and Balance Sheet in order of Liquidity are shown in the above attachment. ⇪

[i]

★ Arrangement in order of Permanence in Liabilities side :-

• Capital
• Liabilities for Expenses
• Bills Payable
• Sundry Creditors

★ Arrangement in order of Permanence in Assets side :-

• Goodwill
• Land and Building
• Plant and Machinery
• Furniture
• Closing Stock
• Sundry Debtors
• Investment
• Bills Receivable
• Bank
• Cash in Hand

[ii]

★ Arrangement in order of Liquidity in Liabilities side :-

• Bills Payable
• Sundry Creditors
• Liabilities for Expenses
• Capital

★ Arrangement in order of Liquidity in Assets side :-

• Cash in Hand
• Bank
• Bills Receivable
• Investment
• Sundry Debtors
• Closing Stock
• Furniture
• Plant and Machinery
• Land and Building
• Goodwill

Here,

• ➺ The final value of Capital has been obtained when Net Profit is added to the amount of Capital and then Drawings is deducted from there.

• ➺ The final value of Sundry Debtors has been obtained when Provision for Doubtful Debțs is deducted from the value of Sundry Debtors.

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❒ Note :-

• (i) When a Balance Sheet is prepared by arranging the assets and liabilities in order of permanence, the assets which are not liquid or has less liquidity, are written first and the assets which are most liquid, are written last. In the same way, the liabilities which are to be paid last, will be written first and the liabilities which are to be paid at the earliest will be written last.

• (ii) When a Balance Sheet is prepared by arranging the assets and liabilities in order of Liquidity, the assets which are in the form of cash or can most easily be converted into cash, are written first and will be followed by those assets which are comparatively less easily converted. In the same way, the liabilities which are to be paid at the earliest, will be written first and will be followed by the liabilities which are to be paid last.