Arrange the following in the correct sequence of liquidity:
A. Prepaid expenses
B. Work in progress
C. Debtors
D. Bills receivables
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → D, C, B, A
Liquidity means how quickly an asset can be turned into cash. Current assets are listed from the most liquid to the least liquid.
D. Bills receivables — first. A bill is a written promise to pay on a fixed date. It can also be discounted with a bank for cash before that date, so it is the most liquid of the four.
C. Debtors — second. Money due from customers turns into cash when they pay, but there is no written bill that can be discounted.
B. Work in progress — third. These goods are not yet finished. They must be completed, then sold, and only then collected as cash.
A. Prepaid expenses — fourth. An expense paid in advance never comes back as cash. The firm only receives the service later. So it is the least liquid current asset.
NCERT (2026-27 Edition): “Working Capital … Current assets are usually more liquid but contribute less to the profits than fixed assets. Examples of current assets, in order of their liquidity, are as under. |