Multiple Choice
Which of the following best describes the classification and normal balance of the Fees Earned account?
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1. Introduction to Accounting
Types of Accounting
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Which of the following best describes the category of 'Accounts Receivable' in accounting?
A
Liability account
B
Equity account
C
Asset account
D
Revenue account
Verified step by step guidance1
Understand the concept of 'Accounts Receivable': Accounts Receivable represents the amount of money owed to a company by its customers for goods or services delivered but not yet paid for. It is recorded as an asset because it is expected to bring future economic benefits.
Review the definition of an asset account: An asset account includes resources owned by a company that are expected to provide future economic benefits, such as cash, inventory, property, and receivables.
Compare 'Accounts Receivable' with other categories: Liability accounts represent obligations the company owes to others, equity accounts represent the owner's claim on the company's assets, and revenue accounts represent income earned from operations. Accounts Receivable does not fit these categories.
Classify 'Accounts Receivable' correctly: Since Accounts Receivable represents money owed to the company and is expected to be collected in the future, it is classified as an asset account.
Conclude the reasoning: Based on the definitions and comparisons, 'Accounts Receivable' is best described as an asset account in accounting.
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