Which of the following statements explains a classified balance sheet?
A)Accounts are classified by their purchase dates.
B)Account balances are listed from the highest amount to the lowest amount.
C)Assets are listed in the order of their liquidity.
D)Assets are listed in alphabetical order.

Question

Quizplus · Accepted Answer

A classified balance sheet organizes assets, liabilities, and equity into categories based on their characteristics. Typically, assets are classified based on their relative liquidity, meaning the ease with which they can be converted to cash. Therefore, option C is the correct explanation of a classified balance sheet. Options A and D are not relevant to the classification of accounts on a balance sheet. Option B refers to a descending order sorting of accounts, but does not necessarily reflect their classification.

Which of the Following Statements Explains a Classified Balance Sheet