Identify the correct classification for the following four ledger accounts:
A) 1 expense, 2 expense, 3 asset, 4 expense.
B) 1 expense, 2 liability, 3 revenue, 4 liability.
C) 1 asset, 2 liability, 3 revenue, 4 liability.
D) 1 asset, 2 liability, 3 asset, 4 liability.

Question

Identify the correct classification for the following four ledger accounts: 
A) 1 expense, 2 expense, 3 asset, 4 expense. 
B) 1 expense, 2 liability, 3 revenue, 4 liability. 
C) 1 asset, 2 liability, 3 revenue, 4 liability. 
D) 1 asset, 2 liability, 3 asset, 4 liability.

Quizplus · Accepted Answer

1. Asset accounts represent resources owned by the company, such as Cash, Accounts Receivable, or Inventory. (Option D: 1 = Asset)
2. Liability accounts represent obligations owed by the company, such as Accounts Payable, Loans Payable, or Wages Payable. (Option D: 2 = Liability)
3. Asset accounts represent inflows of economic resources earned by the company, such as Sales or Interest Income. (Option D: 3 = Asset)
4. Liability accounts represent outflows of economic resources incurred by the company, such as Interest Expense or Wages Expense. (Option D: 4 = Liability)

Identify the Correct Classification for the Following Four Ledger Accounts