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

• A. By original purchase date, from oldest to newest
• B. By liquidity, with current assets listed before noncurrent assets
• C. By market value, from lowest to highest
• D. By legal priority in bankruptcy, from most secured to least secured

Answer: (B)

Verified step by step guidance

1. Understand that a classified balance sheet organizes assets into categories to provide clear information about their nature and liquidity.
2. Recognize that the primary way assets are organized is by liquidity, meaning how quickly they can be converted into cash.
3. Identify that current assets, which are expected to be converted into cash or used up within one year, are listed first.
4. Next, noncurrent assets, which are long-term and not expected to be converted into cash within one year, are listed after current assets.
5. Conclude that this organization helps users of financial statements assess the company's short-term financial health and operational efficiency.