Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Classified Balance Sheet Components

Financial Accounting

2. Transaction Analysis

Classified Balance Sheet Components

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Multiple Choice

Equity is composed of contributed capital and which of the following?

Long-term investments

Retained earnings

Intangible assets

Current liabilities

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Verified step by step guidance

Step 1: Understand the concept of equity in financial accounting. Equity represents the ownership interest in a company and is composed of two main components: contributed capital and retained earnings.

Step 2: Define contributed capital. Contributed capital refers to the funds that shareholders invest in the company, typically through the purchase of stock.

Step 3: Define retained earnings. Retained earnings are the cumulative profits that a company has earned and retained over time, after paying dividends to shareholders. It is a key component of equity.

Step 4: Analyze the options provided in the question. Long-term investments, intangible assets, and current liabilities are not components of equity. They are classified under different sections of the balance sheet.

Step 5: Conclude that the correct answer is retained earnings, as it is the second major component of equity alongside contributed capital.