Key Terms and Definitions


Liquid = easy to transfer to dollar bills without losing value

Liquidate = exchange (or sell) something to receive cash or cash alternative

Liquidity = an asset's ability to easily be liquidated (a measure of how liquid an asset is)

Cash is the most liquid asset available; it has extremely high liquidity. Cash is essentially the liquidity standard; if liquidity was a scale of 0-10, cash would be 10 and 0 would be something like heavy duty equipment that has value but is extremely hard to sell

To increase an Asset account, a Debit entry is made. Conversely, a Credit entry decreases an Asset account. Pretty simple right? So let's say you transfer $100 from Checkings to Savings.