Texas A&M University (TAMU) ACCT229 Introductory Accounting Practice Exam 1

Assets are listed on the Balance Sheet in order of liquidity, which refers to how quickly and easily the assets can be converted into cash. This ordering is important because it provides a clear view of the company's financial position and its ability to meet short-term obligations.

Liquid assets, such as cash and cash equivalents, are placed at the top, as they can be readily used for expenses or investments. Following cash, other current assets like accounts receivable and inventory come next, as these can generally be converted to cash within a year. Non-current assets, such as property, plant, and equipment, appear further down the list as they are less liquid and not readily convertible into cash within a short time frame.

Choosing liquidity as the basis for ordering assets allows investors and creditors to assess a company's short-term financial health more effectively.