Which of the following accounts is NOT included in the asset section of a classified balance sheet?

• A. Inventory
• B. Accounts Payable
• C. Prepaid Expenses
• D. Accounts Receivable

Answer: (B)

Verified step by step guidance

1. Understand the structure of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into specific categories. Assets are typically divided into current assets and non-current assets.
2. Review the definition of each account: Inventory, Prepaid Expenses, and Accounts Receivable are all current assets, while Accounts Payable is a liability.
3. Recall that assets represent resources owned by the company, such as cash, receivables, inventory, and prepaid expenses. Liabilities, on the other hand, represent obligations the company owes to others, such as Accounts Payable.
4. Identify the category of each account: Inventory, Prepaid Expenses, and Accounts Receivable are included in the asset section of the balance sheet. Accounts Payable, being a liability, is not included in the asset section.
5. Conclude that the account NOT included in the asset section of a classified balance sheet is Accounts Payable, as it belongs to the liabilities section.