An advance payment for services is NOT recorded as revenue but rather as a liability for financial reporting reasons.
What is Liquidity?
- According to their liquidity, or how quickly they may be converted into cash, assets are sometimes grouped.
- Cash is the most movable asset on your balance sheet since it may be utilized right away to settle a debt.
- A factory, on the other hand, is an illiquid asset because it will likely take some time to sell it and turn it into cash.
- Current assets are those that are most liquid.
- These assets, which include cash, marketable securities, inventory, and accounts receivable, can all be turned into cash in less than a year. These resources bring in money for your business.
- The category of fixed assets includes all non-liquid assets. These include buildings, automobiles, and equipment. Your company owns fixed assets, which help to generate income but are not used to generate income or retained for cash conversion purposes. Fixed assets are tangible goods that often need a sizable capital investment and last for a considerable amount of time.
To Learn more About liability refer to:
https://brainly.com/question/25687338
#SPJ4
