Liquid Assets

All assets which are capable of being liquidated in a short period of time (typically a few i.e. 1 or 2 months time) are considered to be liquid assets.

Cash balance, Bank balance, Bills Receivable, Recoverable Advances, Sundry debtors etc are some examples of liquid assets.

Liquid assets requiring special attention.

Sundry Debtors

In measuring/analysing funds flow, based on the concept of conservatism, assets are considered at their net values after setting off all losses of which there is information. Reserve for bad and doubtful debts and reserve for discounts on debtors are not actual losses. They are profits kept aside to confront losses in the subsequent accounting period.

These reserves are set off from the balance in sundry debtors account to ascertain the net figure of Sundry Debtors. This net figure is considered for the purpose of Funds flow analysis.

Advances

Assets representing advances which are recoverable in the near future (short period) in cash or any other value are only to be considered as liquid assets. These do not include prepaid expenses since they are not recovered in cash but are written off as expenses in the future.

Journal in the books of ___ for the period from ___ to ___
Date	R/V No.	Particulars		L/F	Amount
Date	R/V No.	Particulars		L/F	Debit	Credit
31-12 2009	-	Cash/Bank a/c To Loans and Advances a/c	Dr.	- -	5,000	5,000
31-12 2009	-	[For the amount received from Mr. Chang, towards the installment recovering the festival advance.]		- -	5,000	5,000
31-12 2009	-	Rent a/c To Pre-paid Rent a/c	Dr.	- -	5,000	5,000
31-12 2009	-	[For writing off the pre-paid rent as expense.]		- -	5,000	5,000

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