Assets are listed on the balance sheet in order of liquidity and liabilities are listed in order of amount.

Question

BlackTom AI · Accepted Answer

Consider what the balance sheet presentation actually uses as the ordering principles.
Option A: 'True' would claim that assets are listed by liquidity and liabilities by amount. While assets are indeed ordered by liquidity, the statement about liabilities is incorrect. Liabilities are typically presented in order of maturity (short-term to long-term) or by type, not by amount.
Option B: 'False' correctly identifies the common practice for liabilities, which is to present them by their expected timing (maturity) and by category, rather than by how large the amounts are. This captures the distinction between asset ordering and liability ordering on standard balance sheets.
Exploring potential misconceptions: Some learners might think both sides are sorted by size, but the standard is liquidity for assets and maturity/type for liabilities, not absolute size. Another common error is to assume liabilities are sorted by amount to highlight larger obligations first; in practice, maturity or category governs the sequence, not raw magnitude.
In sum, the statement conflates the established ordering rules on the balance sheet, making it inaccurate.

Assets are listed on the balance sheet in order of liquidity and liabilities are listed in order of amount.

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