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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Classifying accounts

Balances for each of the following accounts appear in an adjusted trial balance. Identify each as (a) asset, (b) liability, (c) revenue, or (d) expense.

1. Accounts Receivable

2. Equipment

3. Fees Earned

4. Insurance Expense

5. Prepaid Advertising

6. Prepaid Rent

7. Rent Revenue

8. Salary Expense

9. Salary Payable

10. Supplies

11. Supplies Expense

12. Unearned Rent

To determine

Classification of accounts

Asset: Assets refer to the resources owned by the business, which are utilized in the course of the business to generate revenue. The following belong to the assets account:

  • Accounts Receivable
  • Prepaid
  • Cash
  • Land
  • Supplies

Liability: Liabilities include the claims of the creditors on the assets of the business. The liability is the obligation of the business.  The following belong to the liabilities account:

  • Accounts Payable
  • Salaries payable
  • Notes payable
  • Income tax payable
  • Unearned rent

Revenue: Revenue is known as “Top line” because it appears very top on the income statement of the company. It is used to imply profits or net income (bottom line) of the company by subtracting the total expenses from total revenues. The following belong to the revenue account

  • Rent revenue
  • Fees earned
  • Service revenue

Expense: Expense is the cost borne by a company to produce and sell the goods and services to the customers. The following belong to the expense account

  • Salaries expense
  • Insurance expense
  • Supplies expense
  • Utilities expense
  • Depreciation expense

To Identify: Each account would appear as (a) assets, (b) liabilities, (c) revenue or (d) expense.

Explanation
S. No Account name Classification of accounts
1. Accounts receivable Assets (a)
2. Equipment Assets (a)
3. Fees earned Revenue (c)
4. Insurance expense Expense (d)
5. Prepaid advertising Assets (a)
6...

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