Practice prompt · Q:financial-reporting-environment-and-framework/balance-sheet-ordering-001

Does line position determine classification?

Separate a balance sheet line's location from the evidence needed to classify and describe it.

Updated Sep 10, 2026 Review due Dec 10, 2026

Practice

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Choose a response, then check the answer and explanation.

A draft balance sheet places a refundable supplier deposit immediately after Cash. The agreement and expected recovery date have not been reviewed. What is the strongest next step?

Choose the best answer. a Read the deposit agreement, determine when recovery is expected, apply the classification requirements, and then place it under a clear caption. b Classify the deposit as current because it appears immediately after Cash. c Increase total assets because moving the deposit nearer to Cash makes it more liquid. d Classify the deposit as noncurrent because deposits must always appear after property and equipment.

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Answer: a

Choice a. Use the agreement and applicable classification guidance to determine the recovery period. Then choose a clear caption and location without changing the recognized amount or total assets.