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WAEC Financial Accounting 2005 Question 36

Question 36

Final Accounts of a Sole Trader

The correct order of liquidity is

  1. A.stock, debtors, prepayments and cash
  2. B.cash, prepayments, debtors and stock
  3. C.stock, cash, debtors and preyaments
  4. D.debtors, stock, cash and prepayments.
Show the answer and explanation

Answer: A (stock, debtors, prepayments and cash)

Explanation

In order of increasing liquidity: stock, debtors, prepayments, cash.