question 1.
The formula of the balance sheet is called the accounting
equation.
It is: total assets= total liabilities+ total equity.
The 3 accounts it contains are:
1. Assets account
2. liabilities account
3. equity and reserves account
Question 2.
Liquidity tells how easy or difficult it is to buy or sell an
asset in the market.
The more liquid the asset is, the easier it is to buy or sell. In
other words, how is easy it is to convert an asset to cash.
Generally in a balance sheet assets are arranged from high liquidity to low liquidity.
That is the first current assets like cash are presented and then non- current assets like land and building are presented.
(Note: the presentation is different from country to country depending upon the accounting standards they are following. The above one is for the USA.
IN CASE OF INDIA: Generally, in a balance sheet assets are arranged from low liquidity to high liquidity. )
What do we call the formula for the balance sheet? What three accounts does it include?...
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