An entity is required to classify its assets and liabilities as current or non-current unless it is considered more relevant and more reliable for decision-making purposes to present them according to their:
A) age.
B) value.
C) liquidity.
D) physical nature.

Question

Quizplus · Accepted Answer

The most common way of classifying assets and liabilities is based on their liquidity, which refers to the ease with which an asset can be converted to cash or a liability can be settled with cash or other resources. This information is highly relevant and reliable for decision-making purposes, as it allows users to assess an entity's ability to meet its short-term obligations and cash needs. Age, value, and physical nature may also be relevant factors in some contexts, but they are generally less important than liquidity as they do not necessarily reflect an asset's or liability's current economic value or capacity to generate cash flows.

An Entity Is Required to Classify Its Assets and Liabilities