Multiple Choice
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1. Introduction to Accounting
Types of Accounting
Struggling with Financial Accounting?
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Which of the following accounts are classified as stockholders' equity accounts?
A
Accounts Payable
B
Prepaid Expenses
C
Common Stock
D
Retained Earnings
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 includes accounts such as Common Stock, Retained Earnings, and Additional Paid-In Capital.
Identify the accounts listed in the problem: Accounts Payable, Prepaid Expenses, Common Stock, and Retained Earnings.
Classify each account: Accounts Payable is a liability account, Prepaid Expenses is an asset account, Common Stock is a stockholders' equity account, and Retained Earnings is also a stockholders' equity account.
Focus on the accounts that belong to stockholders' equity: From the classification, Common Stock and Retained Earnings are the accounts that fall under stockholders' equity.
Conclude that the correct stockholders' equity accounts are Common Stock and Retained Earnings, as they represent ownership interests in the company.
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