Arrangement of Assets and Liabilities

Assets may be listed based on how quickly they can be converted into cash which is called the order of liquidity. In other words, they’re ranked. The asset most easily converted into cash is listed first followed by the next easiest and so on. Of course since cash is already cash it’s the first asset listed.

Assets may be listed based on the difficulty with which they can be converted into cash, called the order of permanence. These assets are ranked in the opposite order of liquidity; they are ranked from most difficult to convert to cash, to least difficult to convert to cash.

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