Concept explainers
Introduction:
Assets: Assets are those items that provide value for money and future economic benefit for an organization. Assets of an organization may be in these two forms: Tangible or intangible form. Examples: Cash, Short-term investments, Inventories,
Liabilities: Liabilities are obligations of the business. These are the claims against the resources that a business owes to outsiders of the company. Liabilities may be Current liabilities, and Long-term liabilities. Examples: Creditors, Bills payable, Bank overdraft, Salaries and wages payable, and Notes payable.
Expenses: Expenses are the costs that companies borne to produce and sell the goods and services to the customers or clients. Examples: Utilities expense, Salaries expense, advertising expenses.
Revenues: Revenues are the income or earnings that a company receives for delivery of goods and services. Examples: Service revenue, Interest revenue, Fees earned.
Common stock: Common stock is an owners’ claim to the assets of the company.
To Classify: The elements of financial statements.
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FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
- How is cost of goods sold classified in the financial statements?a. As a revenueb. As an expensec. As an assetd. As a liabilityarrow_forwardFor each ofthe following accounts, identify whether that item is an asset, liability, or equity account.a. Bonds payableb. Equipmentc. Accounts payabled. Salaries payablee. Common stockf. Retained earningsg. Cashh. Accounts receivablei. Sales revenuej. Inventoryarrow_forwardDiscuss the basic accounting problem that arises in handling each of the following situations. a. Assets purchased by issuance of common stock. b. Acquisition of plant assets by gift or donation. c. Purchase of a plant asset subject to a cash discount. d. Assets purchased on a long-term credit basis. e. A group of assets acquired for a lump sum. f. An asset traded in or exchanged for another asset.arrow_forward
- Transactions that affect the debit and creditof the following: A. CashB. Accounts ReceivableC. InventoryD. InvestmentsE. PPE (Property, Plant, and Equipment)F. VehiclesG. FurnitureH. Patents (intangible asset)arrow_forwardWhich should be classified as a financial asset? a. Patentb. Trade Accounts Receivablec. Inventoryd. Landarrow_forwardWhich of the following represents amounts owed for goods, supplies, or services purchased? Group of answer choices customer-related payable accounts payable liability for compensated absences bonds payablearrow_forward
- Notes Payable is a(n) and is reported on the A. Asset; Income Statement B. Liability; Balance Sheet C. Liability; Income Statement D. Asset; Balance Sheetarrow_forwardClassify each item as an Asset, a Liability, or a Change to Stockholders' Equity. Asset Liability Change to Stockholders' Equity Merchandise Inventory Service Revenue Accounts Payable Accounts Receivablearrow_forwardFor each item below, indicate to which category of elements of financial statements it belongs. a. Retained earnings. b. Sales. c. Additional paid-in capital. d. Inventory. e. Depreciation. f. Loss on sale of equipment. g. Interest payable. h. Dividends. i. Gain on sale of investment. j. Issuance of common stock.arrow_forward
- Compute the following: A. Current Asset B. Non current asset C. Total asset D. Current liabilities E. Non current liabilities F. Total liabilities G. Equity H. Net income I. Total liabilities and equity J. Prepare a Statement of Financial Positionarrow_forwardElement of financial position isa) Cash.b) Interest revenue.c) wage expenses.d) Sales revenue.arrow_forward2. Which of the following is not a financial asset? a. investment in bonds b. investment in held for trading securities c. prepaid income tax d. interest receivable 3. Which of the following is a financial liability? a. income tax payable b. unearned revenue c. warranty obligation d. lease liabilityarrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College