Multiple Choice
Which of the following best describes what the statement of stockholders' equity reports?
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1. Introduction to Accounting
The Financial Statements
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Which of the following items would NOT appear on the current year-end balance sheet for Armani Company?
A
Retained Earnings
B
Inventory
C
Sales Revenue
D
Accounts Receivable
Verified step by step guidance1
Step 1: Understand the purpose of a balance sheet. A balance sheet is a financial statement that reports a company's assets, liabilities, and equity at a specific point in time. It does not include income statement items like revenues or expenses.
Step 2: Identify the items listed in the problem. The items are Retained Earnings, Inventory, Sales Revenue, and Accounts Receivable.
Step 3: Categorize each item based on its nature. Retained Earnings is part of equity, Inventory is an asset, Sales Revenue is part of the income statement, and Accounts Receivable is an asset.
Step 4: Recall that the balance sheet includes assets, liabilities, and equity, but not income statement items like Sales Revenue. Sales Revenue is reported on the income statement, not the balance sheet.
Step 5: Conclude that the item that would NOT appear on the current year-end balance sheet for Armani Company is Sales Revenue, as it is part of the income statement.
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