Question

Show the liabilities side of the balance sheet (prepared on the basis of

liquidity) of a sole proprietor.​

Answer 1

Answer:

Order of liquidity

In the case of a company, The Companies Act 1956 provides that balance sheet should be prepared as per schedule VI (which has been revised in 2011) given therein and assets and liabilities should be written in the sequence (or order) shown in the Schedule. However, in the case of sole proprietorship, and partnership, no rule is provided for recording assets and liabilities on the balance sheet.

Generally assets and liabilities on a balance sheet may be written on:

(a) Liquidity basis and

(b) Fixity basis.