![]() ![]() In addition, the assets serve as the company’s protection from unforeseen adverse events such as a recession or a sudden decline in demand for the company’s products or services.įinally, their presence directly improves the company’s ability to seek additional financing. Liquid assets ensure a company’s ability to meet its immediate financial obligations and operating expenses. ![]() That determine success in the world of business. Liquidity of each asset, businesses and market analysts use various financial ratios such as the quick ratio and cash ratio to identify the overall level of liquidity of a company. Assets are listed on the balance sheet in order of liquidity, with the most liquid types listed at the top of the balance sheet and the least liquid listed at the bottom.Īlthough there is no direct measure of the Similar to other assets, liquid assets are reported on the balance sheet of a company. Marketable securities (stocks, government bonds).Cash equivalents (checking account, savings account, money market account).The high number of market participants, along with large trading volumes, ensure the fast disposal of the assets without significantly losing value. Generally, liquid assets are traded on well-established markets with a large Prepare a bank reconciliation for Business Solutions for the month ended March 31, 2018. 101, shows an ending cash balance per books of $68,057 as of March 31 (prior to any reconciliation).ġ. Rey verifies that all deposits made in March do appear on the March bank statement. Rey notices that the check she issued for $128 on March 31, 2018, has not yet cleared theį. On March 31, the bank lists $33 interest earned on Business Solutions’s checking account for the month of March.Į. On March 26, the bank lists a $102 charge for printed checks that Business Solutions ordered from the bank.ĭ. On March 25, the bank lists a $50 charge for the safety deposit box expense thatīusiness Solutions agreed to rent from the bank beginning March 25.Ĭ. The check documentation included with the bank statement shows that this check was actually issued by a company named Business Systems.ī. Rey notices that the bank erroneously cleared a $500 check against her account in March that she did not issue. The bank statement with the general ledger Cash account, No. The March 31 bank statement shows an ending cash balance of $67,566. SP 6 Santana Rey receives the March bank statement for Business Solutions on April 11, 2018. In order of liquidity, assets can be organized as: As a result, cash usually comes first, followed by treasury stock, accounts receivable, inventories, and capital equipment. The order of liquidity on the accounting records is the order in which assets are shown in relation to the time it would take to transform them into cash. Liquidity refers to the ease with which assets may be converted into cash and their equivalents. Rank the following assets from most liquid to least liquid: a. ![]()
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