number ot customers. The tollowing are accounts trom a recent balance sheet tor

Question

number ot customers. The tollowing are accounts trom a recent balance sheet tor Venizon: Required: For each account, select whether the account is usually classified as a current asset (CA), noncurrent asset (NCA), current liability (CL), noncurrent liability (NCL), or stockholders' equity (SE), and whether the account usually has a debit or credit balance. Answer is complete but not entirely correct. Debit or CategorizationBalance Balance Sheet Account Credit Debit (1) Accounts Receivable (2) Retained Earnings NCA SE Credit (3) Accrued Expenses Payable SE O/ Debit (4) Prepaid Expenses (5) Common Stock (6) Long-Term 7) Equipment (7) |Plant, pron Investments (8) Accounts Payable SE SE SE Debit Credit Credit Debit 7Plant, Property, and CA NCL SE CL Credit (9) Short-Term Investments (10) Long-Term Debt Debit Credit

Explanation / Answer

Solution - Classification of Balance sheet item with proper explanation

Assets - Current assets are liquid assets and are assets which expected to be received within 1 accounting year of 12 months and other are non current assets

Assets have Debit Balances

Liability : Current Liability are expected to be settled within 12 months and liability which is expected to continues for more than 1 accounting year are non current liability

Liability have credit balances

Equity : Equity of shareholders contain Common stock and retained earnings

Equity have credit balances

Current Asset (CA)

(Since it is expected to be receivable within 12 Months)

Stockholder's Equity (SE)

(It part of equity of the company always.)

Current Liability (CL)

(it is expected to be settled within 12 months)

Current Asset (CA)

(It is classified as current asset until it is fully utilised since it is expected to be utilised in the coming year generally)

Stockholder's Equity (SE)

(it is part of equity always)

Non Current Asset (NCA)

(Long term investments are held for period more than 12 months)

Non Current Asset (NCA)

(This is fixed asset and controlled by entity for long term benefit and fixed assets are not held for purpose of sale but are held for longer period of time)

Current Liability (CL)

(Accounts payable are expected to be settled within 12 months)

Current Asset (CA)

(Short term investments are held for purpose of sale within 12 months)

Non Current Liability (NCL)

(Long term debt covered the period of repayment for more than 12 months. hence these are expected to be settled in more than 12 months)

Serial Number Account Balance sheet categorization Debit or credit balances 1 Accounts receivable

Current Asset (CA)

(Since it is expected to be receivable within 12 Months)

Debit 2 Retained Earnings

Stockholder's Equity (SE)

(It part of equity of the company always.)

Credit 3 Accrued Expenses Payable

Current Liability (CL)

(it is expected to be settled within 12 months)

Credit 4 Prepaid expenses

Current Asset (CA)

(It is classified as current asset until it is fully utilised since it is expected to be utilised in the coming year generally)

Debit 5 Common stock

Stockholder's Equity (SE)

(it is part of equity always)

Credit 6 Long term investments

Non Current Asset (NCA)

(Long term investments are held for period more than 12 months)

Debit 7 Plant, Property and equipment

Non Current Asset (NCA)

(This is fixed asset and controlled by entity for long term benefit and fixed assets are not held for purpose of sale but are held for longer period of time)

Debit 8 Accounts payable

Current Liability (CL)

(Accounts payable are expected to be settled within 12 months)

Credit 9 Short term investments

Current Asset (CA)

(Short term investments are held for purpose of sale within 12 months)

Debit 10 Long term debt

Non Current Liability (NCL)

(Long term debt covered the period of repayment for more than 12 months. hence these are expected to be settled in more than 12 months)

Credit

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