Question

In: Accounting

Rank in order of liquidity: Accounts Receivable Accumulated Depreciation - Equipment Cash Equipment Prepaid Insurance Prepaid...

Rank in order of liquidity:

Accounts Receivable
Accumulated Depreciation - Equipment
Cash
Equipment
Prepaid Insurance
Prepaid Rent
Rent Revenue
Supplies

Solutions

Expert Solution

Answer:

Order of liquidity means in the order of the amount of time an asset or item would generally take to convert them into cash.

Rank in order of liquidity is as follows:

Explanation

Cash

Cash is the most liquid asset.

Rent Revenue

Rent revenue shows the revenue generated out of operations.

Accounts Receivable

Accounts receivable is the amount what customers owe to the company for products or services sold on credit. They are expected to be collected within 30 to 60 days as per terms of payment. Generally they are collected within a year.

Supplies

It shows the cost of supplies on hand at a point in time. This is usually listed on the balance sheet after the Inventory account.

Equipment

Purchased for long term so as to enhance profit earning capacity of the business.

Prepaid Insurance

Prepaid expenses are those expenses which are already paid but services will be received in future.

Prepaid Rent

Accumulated Depreciation - Equipment
  • Accumulated depreciation is entirely used for internal records, and does not represent a payment obligation in any way.


ekkarill92 answered 1 year ago
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