The second most liquid asset that a company has available is everything that falls into the category of marketable securities, including banker’s acceptances, certificates of deposit (CDs), Treasury bills, and other types of financial products that have maturity dates but that companies can withdraw from or sell very easily if necessary.

The accounts receivable category includes the value of all money owed to a company within the next year. Note the important distinction between money that’s owed in the next year and money that’s likely to be paid. Unfortunately, sometimes people refuse to pay what they owe. In these cases, the receivable remains receivable until either the money is paid or the period in which the money is due passes.

After the period passes, the company subtracts the value of the account owed from accounts receivable and transfers it to a subaccount called allowances. Allowances include the value of the money that’s still owed and past due but has yet to be written off as uncollectible (which is considered an expense). Usually, the accounts receivable entry looks something like this: