Multiple Choice
Which of the following best describes a voluntary agreement between two or more people in the context of accounting types?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Which of the following statements is accurate about the Land account in financial accounting?
A
Land is reported as an intangible asset.
B
Land is recorded as a non-depreciable asset on the balance sheet.
C
Land is depreciated over its useful life like buildings and equipment.
D
Land is classified as a current asset because it can be sold quickly.
Verified step by step guidance1
Step 1: Understand the classification of the Land account in financial accounting. Land is considered a tangible asset, not an intangible asset, because it has physical substance and is used in operations.
Step 2: Recognize that Land is recorded as a non-depreciable asset. Unlike buildings and equipment, Land does not lose value due to wear and tear or obsolescence, so it is not depreciated.
Step 3: Clarify that Land is classified as a long-term asset (not a current asset) on the balance sheet. Current assets are expected to be converted into cash or used up within one year, whereas Land is held for long-term use in operations.
Step 4: Eliminate the incorrect statement that Land is depreciated over its useful life. Depreciation applies to assets like buildings and equipment, but Land is not subject to depreciation.
Step 5: Conclude that the accurate statement is: 'Land is recorded as a non-depreciable asset on the balance sheet.' This reflects its proper treatment in financial accounting.
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