Identify Which Items Belong On The Balance Sheet. Accounts Receivable, Net Income, And Owner, Withdrawals Revenue, Expenses And Net Income Cash, Accounts Receivable, And Owner, Capital Owner, Withdrawals, Beginning Owner, Capital, Ending Owner, Capital
The Correct Answer and Explanation is :
The items that belong on the balance sheet are:
- Accounts Receivable
- Cash
- Owner’s Capital (Beginning and Ending)
Explanation:
The balance sheet provides a snapshot of a company’s financial position at a specific point in time, listing its assets, liabilities, and equity. The balance sheet follows the accounting equation:
Assets = Liabilities + Equity
Now, let’s break down each item in the provided list:
- Accounts Receivable: This represents money owed to the company by its customers for goods or services provided on credit. Since it represents a claim on future cash inflows, it is classified as a current asset and appears on the balance sheet.
- Cash: Cash is a highly liquid asset that is essential for the day-to-day operations of a business. It appears as a current asset on the balance sheet, reflecting the amount of cash the company holds at the moment.
- Owner’s Capital: This represents the owner’s investment in the business. It can appear as Beginning Owner’s Capital (the owner’s equity at the start of the period) and Ending Owner’s Capital (the owner’s equity at the end of the period). Owner’s capital is part of the equity section on the balance sheet.
On the other hand, the following items do not belong on the balance sheet:
- Net Income: Net income is a measure of a company’s profitability over a period of time (usually a quarter or year). It appears on the income statement rather than the balance sheet. Net income affects the owner’s equity section of the balance sheet indirectly through retained earnings or capital.
- Owner’s Withdrawals: Withdrawals refer to money taken by the owner from the business for personal use. These transactions are recorded in the equity section but do not appear directly on the balance sheet. They reduce the owner’s equity.
- Revenue and Expenses: Revenue and expenses are reported on the income statement, not the balance sheet. Revenue reflects the company’s sales, while expenses represent the costs incurred in generating revenue. These elements impact net income, which ultimately affects the balance sheet through retained earnings or owner’s capital.
In summary, the balance sheet focuses on assets, liabilities, and equity (including owner’s capital), while income-related items like net income, revenue, and expenses belong on the income statement.