Q 34 Usually current assets are listed in a specific order s

Q 3-4 Usually, current assets are listed in a specific order, starting with cash. What is the objective of this order of listing? Q 3-5 Differentiate between marketable securities and long-term investments. What is the purpose of owning each? Q 3-6 Differentiate between accounts receivable and accounts payable.

Solution

Answer :3-4

Current assets are listed in liquidity order that means most liquid assets are placed first. Liquid means assets which can be converted into Cash in a very short time. Cash is the most liquid asset that is the reason it is placed at the first place under current assets.

3-5

Marketable securities are securities which are to be sold within 12 months or a year while long term investment are held for more than a year. Further, marketable securities are shown under current assets and long term investment are shown under non-current assets.

3-6

Accounts receivable means right to receive a certain sum of money from the customers while Accounts payable means an obligation to pay a certain sum of money to the suppliers. Further, Accounts receivable is shown under current assets and Accounts payable is shown under current liabilities.