Accounts maintained within the ledger that appear on the statement of financial position include all of the following except
- a. Salaries expense.
- b. Interest payable.
- c. Supplies.
- d. Share capital – ordinary.
The correct answer and explanation is :
The correct answer is a. Salaries expense.
Explanation:
The Statement of Financial Position, also known as the Balance Sheet, represents the financial position of a company at a specific point in time, listing its assets, liabilities, and equity. The goal of the statement is to provide a snapshot of the company’s resources (assets) and obligations (liabilities), as well as the owners’ equity.
Now, let’s analyze the options one by one:
- Salaries expense (a):
- Salaries expense is an item found in the Income Statement (also known as the Profit and Loss Statement), not the Statement of Financial Position. The Income Statement records revenues and expenses over a specific period, and salaries expense reflects the cost of employee compensation during that period.
- The Income Statement reflects the company’s financial performance, showing profits or losses. Salaries expense reduces the company’s net income but is not directly reported on the Balance Sheet.
- While salaries payable (a liability) could appear on the Balance Sheet if there is an outstanding amount to be paid, the expense itself is part of the Income Statement.
- Interest payable (b):
- Interest payable is a liability that appears on the Statement of Financial Position. It represents the amount of interest the company owes on its borrowings but hasn’t yet paid. This is classified as either a current or non-current liability depending on when it is due.
- Supplies (c):
- Supplies are assets and typically appear under current assets on the Statement of Financial Position. These are items that the company uses in its daily operations and are expected to be consumed within a year or during the operating cycle.
- Share capital – ordinary (d):
- Share capital – ordinary refers to the equity invested by the shareholders in the company in exchange for shares of stock. This is classified as equity on the Statement of Financial Position.
In summary, Salaries expense does not appear on the Statement of Financial Position because it pertains to the company’s operations during a given period and is reported in the Income Statement.