Question

In: Chemistry

Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses.

Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses.

Account Classifications Accounts Related Transactions 1. Common stock Sale of common stock to investors. 2. Equipment Salaries payable Service revenue Equipment used for operations. Amounts owed to employees. Sales of services to customers. 3. 4. Utilities expense Supplies Research and 5. Cost of utilities. Purchase of office supplies. Cost of

 

Required:

For each transaction, indicate whether the related account would be classified in the balance
sheet as

(a) An asset,

(b) A liability,

(c) Stockholders’ equity; in the income statement as

(d) A revenue or

(e) An expense; or in the statement of stockholders’ equity as

(f) A dividend.

 

 

Solutions

Expert Solution

External transactions are the transactions or activities which the business makes with the outside world that will affect the financial position of the business.

 

Assets are the resources owned by the business which are being used for the purpose of earnings the income for the business by its intended use.

 

Liabilities are the claims of the outside world against the assets of the business which the business owes to the outside world.

 

Stockholder’s equity is a claim of the owners (i.e. stockholders of the company) on the company’s assets which is to be paid at the time of winding up of the business.

 

Dividend is an amount paid to the stockholders of the company out of net income earned for the period as a consideration for investment made in the business.

 

Revenues are the amount earned by the business during the period of time by providing the services rendered and by the sale of goods.

 

Expenses are the amount incurred for earning the revenues as aforesaid during the same period of time.

 

The terms have been matched as under:

  Accounts Related transaction Account Classification
1 Common stock Sale of common stock to investors Stockholders\'s Equity
2 Equipment Equipment used for operation Asset
3 Salaries Payable Amount owed to employees Liability
4 Service revenue Sales of service to customers Revenue
5 Utilities expense Cost of utilities Expense
6 Supplies Purchase of office supplies Asset
7 Research and development cost Cost of research and development Expense
8 Land Property used for operations Asset
9 Income tax payable Amounts owed to IRS for taxes Liability
10 Interest payable Amount of interest owed on borrowing. Liability

 

To conclude, it must be stated that each transaction will be having a two way effect on the external transaction.

To conclude, it must be stated that each transaction will be having a two way effect on the external transaction.

Junaid answered 2 years ago
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