Question text A friend who owns a small bookstore business named "Amazing Read". The friend knows that you are studying accounting, and has asked if you would help prepare the entity’s classified balance sheet statement and an income statement. To perform this task, the friend has provided you with the following list of items generated from the transactions for the year. You are required to classify each item and select the report in which the item will be presented [table]
Item | $ | Classification | Report Accumulated depreciation | 6600 | Answer 1 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 2 Question 1 Income StatementBalance Sheet 5 year bank loan | 124000 | Answer 3 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 4 Question 1 Income StatementBalance Sheet Amounts owing to employees | 5600 | Answer 5 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 6 Question 1 Income StatementBalance Sheet Amounts owing to family | 46000 | Answer 7 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 8 Question 1 Income StatementBalance Sheet Bank | 28900 | Answer 9 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 10 Question 1 Income StatementBalance Sheet Book inventory | 68000 | Answer 11 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 12 Question 1 Income StatementBalance Sheet Capital | 32380 | Answer 13 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 14 Question 1 Income StatementBalance Sheet Cash sales | 145800 | Answer 15 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 16 Question 1 Income StatementBalance Sheet Cash withdrawn by owner | 18000 | Answer 17 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 18 Question 1 Income StatementBalance Sheet Cost of books sold | 89020 | Answer 19 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 20 Question 1 Income StatementBalance Sheet Cost of catalogues used | 4500 | Answer 21 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 22 Question 1 Income StatementBalance Sheet Depreciation | 6800 | Answer 23 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 24 Question 1 Income StatementBalance Sheet Insurance premium prepaid | 14700 | Answer 25 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 26 Question 1 Income StatementBalance Sheet Maintenance of website | 5400 | Answer 27 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 28 Question 1 Income StatementBalance Sheet Marketing costs | 12500 | Answer 29 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 30 Question 1 Income StatementBalance Sheet Sales of book related products | 38000 | Answer 31 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 32 Question 1 Income StatementBalance Sheet Shelving and display cabinets | 23000 | Answer 33 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 34 Question 1 Income StatementBalance Sheet Shop rental | 24000 | Answer 35 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 36 Question 1 Income StatementBalance Sheet Wages paid | 26000 | Answer 37 Question 1 Current AssetNon Current AssetCurrent LiabilityNon Current LiabilityOwners EquityRevenueExpense | Answer 38 Question 1 Income StatementBalance Sheet
[/table]Please answer all parts of the question.

Question

BlackTom AI · Accepted Answer

The task presents a long list of year-end items from a small bookstore and asks you to classify each item into the appropriate element of a classified balance sheet (Current Asset, Non-Current Asset, Current Liability, Non-Current Liability, or Owners’ Equity) and the corresponding report (Balance Sheet or Income Statement).
Because the provided data in this prompt includes only one answer string (Non Current Asset) and no explicit multiple-choice options to analyze, I will walk through the typical classification logic for each item so you can apply it consistently when filling out the table. I will also point out common pitfalls and how to decide current vs non-current and which report each item belongs to.

General principles to apply
- Assets: resources controlled by the business that will bring future economic benefits. They are presented on the Balance Sheet. They are further split into Current Assets (expected to be converted to cash or used within 12 months) and Non-Current Assets (longer-term resources such as property, plant, equipment).
- Liabilities: obligations of the business. They are presented on the Balance Sheet and split into Current Liabilities (due within 12 months) and Non-Current Liabilities (due after 12 months).
- Owners’ Equity: the residual interest in the assets after deducting liabilities; includes contributed capital, retained earnings, and drawings where applicable, and is presented on the Balance Sheet.
- Revenue and Expenses: reported on the Income Statement (profit or loss for the period).
- Some items are contra-accounts or have special treatment (e.g., accumulated depreciation reduces the asset account; depreciation expense is an operating expense).

Item-by-item reasoning (mapped to typical classifications)
1) Accumulated depreciation | 6600
- This is a contra-asset account associated with fixed assets. It reduces the related Non-Current Asset on the Balance Sheet. It is not a stand-alone asset but a deduction to assets. Report: Balance Sheet, as a reduction of a Non-Current Asset (Non Current Asset). Pitfall: it should not be classified as a separate expense or as a current asset.

2) 5 year bank loan | 124000
- A bank loan is a liability. If the term is five years, it is a Non-Current Liability (due beyond 12 months). Report: Balance Sheet, Non Current Liability.

3) Amounts owing to employees | 5600
- This represents wages or salaries earned but not yet paid (accrued liabilities). These are current obligations due within 12 months. Report: Balance Sheet, Current Liability.

4) Amounts owing to family | 46000
- If this represents amounts the entity owes to owner-family members (e.g., related-party borrowings or loans), this is a liability unless it is more properly categorized as Owner’s Equity if it represents capital contributed or drawings. Given typical wording “amounts owing to family” suggests a liability to related parties, hence a Current or Non-Current Liability depending on repayment terms (if not specified, assume Current Liability as a short-term payable). Report: Balance Sheet, Current Liability (unless terms indicate it is a long-term loan, which would be Non-Current Liability).

5) Bank | 28900
- Bank refers to cash at bank or a bank balance. This is a Current Asset (cash or cash at bank is usually classified as a current asset, since it is readily available to settle obligations within 12 months). Report: Balance Sheet, Current Asset.

6) Book inventory | 68000
- Inventory is a current asset (goods held for sale in the ordinary course of business). Report: Balance Sheet, Current Asset.

7) Capital | 32380
- Capital typically refers to Owner’s Equity (contributed capital). It is not a liability. Report: Balance Sheet, Owners Equity.

8) Cash sales | 145800
- Cash sales represent revenue earned from selling inventory. This is a component of Revenue on the Income Statement (not an asset). If you’re listing it as a line item for the Income Statement, it goes under Revenue/Sales. Report: Income Statement, Revenue.

9) Cash withdrawn by owner | 18000
- Withdrawals by the owner reduce Owners’ Equity (drawings). They are not a expense; they reduce equity. Report: Balance Sheet, Owners Equity (as a deduction from capital/retained earnings depending on presentation).

10) Cost of books sold | 89020
- This is an expense representing the cost of inventory sold during the period. Report: Income Statement, Expense (Cost of Goods Sold).

11) Cost of catalogues used | 4500
- This is an expense related to marketing or office supplies used. It reduces profit and is recorded on the Income Statement as an Expense.

12) Depreciation | 6800
- Depreciation is an expense recognized for the wear and tear of non-current assets (unless presented as an accumulation in accumulated depreciation, which is a contra-asset). For the purpose of the Income Statement, depreciation expense is recorded as an Expense. Report: Income Statement, Expense. Note that the corresponding accumulated depreciation reduces a Non-Current Asset on the Balance Sheet.

13) Insurance premium prepaid | 14700
- Prepaid insurance is an asset (a current asset) representing payments made for coverage in advance of the period to come. It will be expensed over time as the insurance coverage is used. Report: Balance Sheet, Current Asset.

14) Maintenance of website | 5400
- This is a maintenance expense related to ongoing operations. It should appear as an Expense on the Income Statement.

15) Marketing costs | 12500
- Marketing costs are operating expenses. Report: Income Statement, Expense.

16) Sales of book related products | 38000
- This is revenue from sales, so it is a Revenue item on the Income Statement. Report: Income Statement, Revenue.

17) Shelving and display cabinets | 23000
- This is typically a tangible fixed asset used in operations. It would be classified as a Non-Current Asset (Property, Plant & Equipment). Report: Balance Sheet, Non Current Asset.

18) Shop rental | 24000
- Rent expense is an operating expense. Report: Income Statement, Expense.

19) Wages paid | 26000
- Wages paid is a payroll expense. Report: Income Statement, Expense.

20) (No item provided beyond previous list) Cost of books sold (already covered as item 10.

Note on flow and consistency
- If you encounter items that could be viewed as either current or non-current, check whether they are expected to be realized or settled within 12 months. Cash, inventory, and receivables are typically current assets; property, equipment, and long-term investments are non-current assets. Short-term payables and accrued expenses are current liabilities; long-term loans and other long-term obligations are non-current liabilities.
- Revenue and expenses should be reported on the Income Statement for the period, unless the item is directly tied to an asset value adjustment (like depreciation contra accounts, which affect asset value on the Balance Sheet and depreciation expense on the Income Statement).

Summary alignment guide (quick reference)
- Accumulated depreciation: Balance Sheet, Non-Current Asset (contra-asset)
- 5 year bank loan: Balance Sheet, Non-Current Liability
- Amounts owing to employees: Balance Sheet, Current Liability
- Amounts owing to family: Balance Sheet, Current Liability (or Non-Current Liability if long-term terms specified)
- Bank: Balance Sheet, Current Asset
- Book inventory: Balance Sheet, Current Asset
- Capital: Balance Sheet, Owners Equity
- Cash sales: Income Statement, Revenue
- Cash withdrawn by owner: Balance Sheet, Owners Equity
- Cost of books sold: Income Statement, Expense
- Cost of catalogues used: Income Statement, Expense
- Depreciation: Income Statement, Expense (with offset on Balance Sheet via Accumulated Depreciation, Non-Current Asset)
- Insurance premium prepaid: Balance Sheet, Current Asset
- Maintenance of website: Income Statement, Expense
- Marketing costs: Income Statement, Expense
- Sales of book related products: Income Statement, Revenue
- Shelving and display cabinets: Balance Sheet, Non-Current Asset
- Shop rental: Income Statement, Expense
- Wages paid: Income Statement, Expense

If you provide a fully filled list with explicit option labels (e.g., A, B, C, D) or confirm any terms for items like “amounts owing to family” (short-term vs long-term), I can align each item to a specific option and present a completed set of classifications matching the required table structure.

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