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

Match each of the following accounts to its proper balance sheet classification. Which of the following is correctly matched?A) Accounts Receivable — Current AssetB) Accumulated Depreciation — Current LiabilityC) Prepaid Insurance — Long-term LiabilityD) Common Stock — Current Asset

B) Accumulated Depreciation — Current Liability

D) Common Stock — Current Asset

A) Accounts Receivable — Current Asset

C) Prepaid Insurance — Long-term Liability

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Verified step by step guidance

Step 1: Understand the classifications on the balance sheet. The balance sheet is divided into three main sections: Assets, Liabilities, and Equity. Assets are further classified as Current Assets (expected to be converted to cash or used within one year) and Non-Current Assets (long-term assets). Liabilities are divided into Current Liabilities (due within one year) and Long-term Liabilities (due after one year). Equity represents ownership interest in the company.

Step 2: Analyze each account and its classification. For example, Accounts Receivable represents amounts owed to the company by customers and is typically collected within one year, making it a Current Asset. Accumulated Depreciation is a contra-asset account that reduces the value of fixed assets and is not a liability. Prepaid Insurance is an asset because it represents a payment made in advance for future benefits, and it is usually classified as a Current Asset if the benefit is expected within one year. Common Stock represents ownership in the company and is classified under Equity, not as an asset.

Step 3: Evaluate the options provided in the problem. Option A correctly matches Accounts Receivable to Current Asset. Option B incorrectly classifies Accumulated Depreciation as a Current Liability. Option C incorrectly classifies Prepaid Insurance as a Long-term Liability. Option D incorrectly classifies Common Stock as a Current Asset.

Step 4: Confirm the correct answer. Based on the analysis, the correct classification is Option A: Accounts Receivable — Current Asset.

Step 5: Review the reasoning behind the classifications to ensure understanding. This involves recognizing the nature of each account and its expected usage or settlement timeframe, which determines its classification on the balance sheet.