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.

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Chapter 4, Problem 4.2EX

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.

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Entry 4 5 6 7 8 CO 3 2 9 1 10 Explanation Interest Expense Interest Payable Depreciation Expense Accumulated Depreciation Unearned Revenue Services Revenue Insurance Expense Prepaid Insurance Salaries Payable Cash Prepaid Rent Cash Salaries Expense Salaries Payable Interest Receivable Interest Revenue Cash Journal Entries Cash expense. Accounts Receivable (from consulting) Unearned Revenue Cash Debit 1,300 4,400 3,600 3,700 2,000 4,500 5,600 5,400 8,200 7,100 2,200 Credit 1,300 4,400 3,600 3,700 2,000 4,500 5,600 5,400 8,200 7,100

Which of the following best describes the classification and normal balance of the accounts receivable account? Select one: a. Asset, Debit b. Liability, credit c. Revenue, credit d. Owner's equity, debit

For journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. To record receipt of unearned revenue. To record this period's earning of prior unearned revenue. To record payment of an accrued expense. To record receipt of an accrued revenue. To record an accrued expense. To record an accrued revenue. To record this period's use of a prepaid expense. To record payment of a prepaid expense. To record this period's depreciation expense.