Multiple Choice
Which of the following is true about a lease agreement in accounting?
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1. Introduction to Accounting
Types of Accounting
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Which of the following statements is true regarding publicly-issued common stock?
A
It is traded on public stock exchanges and ownership can be transferred freely.
B
It represents a liability on the company's balance sheet.
C
It cannot be issued by corporations.
D
It is only available to company employees and not to the general public.
Verified step by step guidance1
Understand the nature of publicly-issued common stock: Publicly-issued common stock represents ownership in a corporation and is available for purchase by the general public through stock exchanges.
Clarify the accounting treatment: Common stock is classified as equity on the company's balance sheet, not a liability. Equity represents ownership interest, while liabilities represent obligations owed by the company.
Evaluate the issuance process: Corporations can issue common stock to raise capital. This is a common practice and is not restricted to any specific type of corporation.
Analyze the transferability: Publicly-issued common stock can be freely traded on stock exchanges, allowing ownership to be transferred between individuals without restrictions.
Eliminate incorrect statements: Based on the above clarifications, identify the correct statement: 'It is traded on public stock exchanges and ownership can be transferred freely.'
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