Multiple Choice
Which of the following best describes the primary focus of managerial accounting compared to financial accounting?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is an example of a stockholder's equity account?
A
Inventory
B
Accounts Payable
C
Common Stock
D
Prepaid Expenses
Verified step by step guidance1
Understand the concept of stockholder's equity: Stockholder's equity represents the owners' claim to the assets of a company after all liabilities have been deducted. It includes accounts such as Common Stock, Retained Earnings, and Additional Paid-In Capital.
Analyze each option provided in the question: Inventory and Prepaid Expenses are classified as assets, while Accounts Payable is classified as a liability. None of these fall under stockholder's equity.
Recognize that Common Stock is a stockholder's equity account: Common Stock represents the ownership interest of shareholders in the company and is part of the equity section of the balance sheet.
Review the classification of accounts: Stockholder's equity accounts are distinct from asset and liability accounts. They reflect the residual interest in the company held by its owners.
Conclude that the correct answer is Common Stock, as it is the only option listed that belongs to the stockholder's equity category.
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