The primary basis for the classification of assets and liabilities in the balance sheet is:

Question

Quizplus · Accepted Answer

The primary basis for the classification of assets and liabilities in the balance sheet is liquidity. Assets and liabilities are classified as current or long-term based on their ability to be converted into cash within a year (or the company's operating cycle) or after that period. This classification helps investors and analysts assess a company's ability to meet its short-term obligations and manage its cash flow. Profitability, tangibility, and degree of risk may also be considered in analyzing a company's financial position, but they are not the primary basis for classification in the balance sheet.

The Primary Basis for the Classification of Assets and Liabilities