Multiple Choice
In the context of types of accounting, customer satisfaction is most directly associated with which of the following types?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is classified as a fixed asset on the balance sheet?
A
Accounts Receivable
B
Land
C
Inventory
D
Prepaid Insurance
Verified step by step guidance1
Understand the concept of fixed assets: Fixed assets are long-term tangible assets used in the operations of a business and are not expected to be converted into cash within a year. Examples include land, buildings, machinery, and equipment.
Analyze each option provided in the question: Accounts Receivable, Inventory, and Prepaid Insurance are all current assets, meaning they are expected to be converted into cash or used up within a year. Land, however, is a long-term asset used in business operations.
Recognize that land is classified as a fixed asset because it is a tangible asset that is not consumed or converted into cash within a short period and is used for business purposes.
Review the balance sheet structure: Fixed assets are typically listed under the 'Property, Plant, and Equipment' section of the balance sheet, separate from current assets like Accounts Receivable, Inventory, and Prepaid Insurance.
Conclude that the correct classification for land is as a fixed asset on the balance sheet, while the other options are classified as current assets.
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