Cash and Liquid Assets on the Balance Sheet
Response to the following problem:
The following accounts are listed in a company's general ledger. The accountant wants to place the items in order of liquidity on the balance sheet.
Accounts receivable
Certificates of deposit (six months) Investment in stock
Prepaid rent
Money market fund Petty cash fund
Required:
Rank the accounts in terms of liquidity. Identify items to be included in the total of cash and explain why the items not included in cash on the balance sheet are not as liquid as cash. Explain how these items should be classified.