Multiple Choice
Which of the following will be found in the liabilities section of a firm's classified balance sheet?
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2. Transaction Analysis
Classified Balance Sheet Components
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Which of the following is NOT listed on a classified balance sheet?
A
Accounts Payable
B
Inventory
C
Service Revenue
D
Retained Earnings
Verified step by step guidance1
Understand the structure of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into specific categories such as current assets, non-current assets, current liabilities, non-current liabilities, and equity.
Review the components typically listed under each section: For example, current assets include items like cash, accounts receivable, and inventory, while current liabilities include accounts payable and accrued expenses. Equity includes retained earnings and common stock.
Identify the nature of 'Service Revenue': Service Revenue is an income statement account, not a balance sheet account. It represents the revenue earned from providing services and is part of the company's performance during a specific period.
Compare the listed items: Accounts Payable, Inventory, and Retained Earnings are all balance sheet accounts. Accounts Payable is a current liability, Inventory is a current asset, and Retained Earnings is part of equity.
Conclude that Service Revenue is NOT listed on a classified balance sheet because it belongs to the income statement, not the balance sheet.
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