In a classified balance sheet, how are assets typically listed?

• A. In alphabetical order by account title
• B. In order of profitability, from highest gross margin to lowest gross margin
• C. In order of liquidity, starting with the most liquid assets (e.g., cash) and ending with the least liquid
• D. In order of original cost, from highest cost to lowest cost

Answer: (C)

Verified step by step guidance

1. Understand that a classified balance sheet organizes assets into categories such as current assets, long-term investments, property, plant and equipment, and intangible assets.
2. Recognize that within these categories, assets are listed based on their liquidity, which means how quickly and easily they can be converted into cash.
3. Identify that the most liquid assets, like cash and cash equivalents, are listed first because they are readily available for use.
4. Next, list other current assets such as accounts receivable and inventory, which are less liquid than cash but expected to be converted into cash within a year.
5. Finally, list long-term assets such as property, plant, and equipment, which are the least liquid, reflecting their longer-term use in the business.