A stock gain is considered

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BlackTom AI · Accepted Answer

Question restated: 'A stock gain is considered' with options: a) an asset account. b) an owner's equity account. c) a revenue account. d) a liability account.

Option a: 'an asset account.' An asset account would track resources owned by the business, such as cash, inventory, or equipment. A stock gain, however, represents the increase in value that provides income, not a resource that the entity owns or holds for future economic benefit. Therefore it does not fit the definition of an asset.

Option b: 'an owner's equity account.' Owner's equity accounts reflect the residual interest in the assets after liabilities, such as common stock, retained earnings, or capital contributed. A stock gain increases revenue or income, not directly the owner’s equity category, though over time it can affect retained earnings. However, on the income statement, gains are typically recognized separately from equity accounts, so this option misclassifies the nature of the gain.

Option c: 'a revenue account.' A stock gain is considered income generated from business activities and is recorded as revenue or gain in the income statement. This aligns with how gains are treated in accounting: they increase the company’s earnings and are reflected in the revenue/gain sections.

Option d: 'a liability account.' A liability account records obligations the company owes, such as loans or accounts payable. A stock gain does not create an obligation or payable, so this choice is incorrect.

Summary of reasoning: The concept of a stock gain pertains to income generated, which is recorded under revenue or gains on the income statement. It is not an asset, liability, or owner’s equity item in standard accounting classifications. Therefore, option c correctly identifies the nature of a stock gain as a revenue (income) account, while the other options misclassify the gain’s underlying accounting category.

MUF0022 Accounting Unit 2 - Semester 2, 2025 Quiz: Accounting for Stock

A stock gain is considered

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