shown after deducting a reasonable provision for bad and doubtful debts. Accountancy - Tutorial note Prepaid expenses are treated as current assets. Though cash cannot be realised from prepaid expenses, the service will be available against these without further payment. c) Liquid assets Liquid assets are the assets which are either in the form of cash or which can be immediately converted into cash within a very short period of time, such as cash at bank, bills receivable, short-term investments, debtors and accrued incomes.
In other words, if prepaid expenses and closing stock are excluded from current assets, the balance is known as liquid assets. d) Investments Amount invested outside the business in shares, debentures, bonds and other securities is called investments. If it is invested for a period more than a year they are called long-term investments. If they are invested for a period less than a year they are short term investments and shown under current assets.
e) Wasting assets These are the assets which get exhausted gradually in the process of excavation. Examples: mines and quarries. f) Fictitious or Nominal assets These are assets only in name but not in reality. These assets are not really assets but are shown on the assets side only for the purpose of writing off by transferring them to the profit and loss account gradually over a period of time in future.
Such assets include the expenditures, the benefit of which lasts for more than a year, not yet written off, such as advertisement expenses, preliminary expenses, etc. B) Classification of liabilities Liabilities or equities are claims against the business entity. These are the amounts owed by a business entity to the outsiders (outsiders equity) and owners (owners equity). Liabilities may be classified according to their nature as follows: (a) Fixed or long-term liabilities The liabilities which are to be repaid after one year or more are termed as long-term liabilities.
Example: Long-term loans. (b) Current or short-term liabilities The liabilities which are expected to be paid within the normal operating cycle or one year