Multiple Choice
One of the most important uses of financial statement information within the firm is:
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1. Introduction to Accounting
The Financial Statements
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For each of the following items, indicate to which category of elements of financial statements it belongs. Which of the following is classified as an asset?
A
Revenue
B
Accounts Receivable
C
Accounts Payable
D
Owner's Capital
Verified step by step guidance1
Step 1: Understand the categories of financial statement elements. The main categories are assets, liabilities, equity, revenues, and expenses. Assets represent resources owned by the entity that provide future economic benefits.
Step 2: Analyze each item provided in the problem. Start with 'Revenue.' Revenue is classified as an income statement element and represents the earnings from the entity's operations, not an asset.
Step 3: Examine 'Accounts Receivable.' Accounts Receivable is classified as an asset because it represents money owed to the entity by customers for goods or services provided, which will provide future economic benefits.
Step 4: Review 'Accounts Payable.' Accounts Payable is classified as a liability because it represents amounts the entity owes to suppliers or creditors, not an asset.
Step 5: Consider 'Owner's Capital.' Owner's Capital is classified as equity, representing the owner's investment in the business, not an asset.
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