Multiple Choice
Cash is reported on which of the following financial statements?
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1. Introduction to Accounting
The Financial Statements
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Which of the following items is NOT included in stockholders' equity on the balance sheet?
A
Common stock
B
Additional paid-in capital
C
Retained earnings
D
Accounts payable
Verified step by step guidance1
Understand the concept of stockholders' equity: Stockholders' equity represents the owners' claim to the assets of a corporation after all liabilities have been deducted. It typically includes components such as common stock, additional paid-in capital, retained earnings, and sometimes treasury stock.
Review the components of stockholders' equity: Common stock represents the ownership interest in the corporation, additional paid-in capital reflects the amount shareholders paid above the par value of the stock, and retained earnings are the accumulated profits that have not been distributed as dividends.
Analyze the item 'Accounts payable': Accounts payable is a liability, not part of stockholders' equity. It represents amounts owed by the company to suppliers or creditors for goods and services received but not yet paid for.
Compare the items listed in the question: Common stock, additional paid-in capital, and retained earnings are all part of stockholders' equity, while accounts payable is a liability and does not belong in stockholders' equity.
Conclude that accounts payable is the correct answer because it is not included in stockholders' equity on the balance sheet.
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