When preparing the financial statements of a company:
A) assets are classified as current and plant and equipment.
B) current assets are the most liquid assets.
C) the balance sheet must be prepared using the account format.
D) the income statement can be prepared using the multi-step or report format.

Question

Quizplus · Accepted Answer

Current assets are generally considered the most liquid assets as they are expected to be converted into cash within a year. Assets are classified into different categories based on their liquidity and nature. However, the other options listed are incorrect. The balance sheet can be prepared using either the account or report format, depending on management's preference. Plant and equipment is just one type of property, plant, and equipment that can be included in assets. The income statement can be prepared using either multi-step or single-step format.

When Preparing the Financial Statements of a Company