Question

The correct order to present current assets is ___________.

a. cash, inventories, prepaid items, accounts receivable.
b. cash, accounts receivable, inventories, prepaid items.
c. cash, accounts receivable, prepaid items, inventories
d. cash, inventories, accounts receivable, prepaid items.

Answer 1

The correct order to present current assets is cash, accounts receivable, inventories, and prepaid items.

Step-by-step explanation:

The correct order to present current assets is cash, accounts receivable, inventories, and prepaid items. This order is determined by the liquidity and the ease with which these assets can be converted into cash. Cash is the most liquid asset as it can be easily used to settle obligations, followed by accounts receivable, which represents money owed to the company.

Inventories come next, as they represent goods that will be sold shortly. Prepaid items are presented last, as they represent expenses that have been paid in advance and will be used up over time.

Answer 2

B. Cash, accounts receivable, inventories, prepaid items.

Step-by-step explanation:

In the balance sheet, assets are presented in an orderly manner guided by the amount of time they take to convert into cash. Assets requiring the shortest time to convert into cash will appear first. Cash will always be on top as it does not require conversion.

Goodwill comes last as the business will have to be sold for it to turn into cash.

1. In the list provided, cash will appear first.
2. Accounts receivable is money a business expects to receive from customers for goods or services provided. In practice, the money should be received within 60 days
3. Inventories in assets refer to finished goods in the store. They are awaiting sales. Inventories will take longer as stocks have to be sold and become account receivable before converting to cash.
4. Prepaid items are expenses paid before their due date. They appear in the balance sheet as cash assets because they have not been consumed. The expectation is that they will be utilized within the current year. Converting into cash them will require getting a refund from the recipient of the funds, which could be a lengthy process.