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Legal Matters has provided you with the following list of accounts and have asked you to identify the appropriate element for each of the listed accounts:[table] Account Name | Element Accounts Payable | Blank 1 Question 1 AssetLiabilityOwners' EquityIncomeExpense Accounts Receivable | Blank 2 Question 1 AssetLiabilityOwners' EquityIncomeExpense Bank | Blank 3 Question 1 AssetLiabilityOwners' EquityIncomeExpense Bank Loan | Blank 4 Question 1 AssetLiabilityOwners' EquityIncomeExpense Capital | Blank 5 Question 1 AssetLiabilityOwners' EquityIncomeExpense Depreciation | Blank 6 Question 1 AssetLiabilityOwners' EquityIncomeExpense Discount expense | Blank 7 Question 1 AssetLiabilityOwners' EquityIncomeExpense Discount Income | Blank 8 Question 1 AssetLiabilityOwners' EquityIncomeExpense Drawings | Blank 9 Question 1 AssetLiabilityOwners' EquityIncomeExpense Electricity | Blank 10 Question 1 AssetLiabilityOwners' EquityIncomeExpense Fees Revenue | Blank 11 Question 1 AssetLiabilityOwners' EquityIncomeExpense Furniture & Fittings | Blank 12 Question 1 AssetLiabilityOwners' EquityIncomeExpense Motor Vehicle | Blank 13 Question 1 AssetLiabilityOwners' EquityIncomeExpense Rent | Blank 14 Question 1 AssetLiabilityOwners' EquityIncomeExpense Supplies expense | Blank 15 Question 1 AssetLiabilityOwners' EquityIncomeExpense Supplies on Hand | Blank 16 Question 1 AssetLiabilityOwners' EquityIncomeExpense Telephone & Internet | Blank 17 Question 1 AssetLiabilityOwners' EquityIncomeExpense Wages | Blank 18 Question 1 AssetLiabilityOwners' EquityIncomeExpense [/table]
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Step-by-Step Analysis
The task presents a set of account names and asks you to classify each into one of the fundamental accounting categories (Asset, Liability, Owners' Equity, Income, or Expense). Below, I work through each account individually, explaining the logic for the classification and highlighting common pitfalls.
Account: Accounts Payable
Classification: Liability
Reasoning: Accounts payable represents amounts the business owes to suppliers or creditors for goods or services received. It is an obligation the company must settle in the future, which fits the definition of a liability rather than an asset or equity. If you recognize this as a current liability, you’re aligning with standard practice.
Account: Accounts Receivable
Classification: Asset
Reasoning: Accounts receivable is money owed to the business by customers who have purchased on credit. It is a future economic benefit and a resource controlled by the entity, which makes it an asset. The amount is expected to be collected in the short term, typically.
Account: Bank
Classification: Asset
Reasoning: ......Login to view full explanationLog in for full answers
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