Which of the following accounts are included in the calculation of net working capital?

• A. Accounts Payable
• B. Accounts Receivable
• C. Equipment
• D. Retained Earnings

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of net working capital. Net working capital is calculated as Current Assets minus Current Liabilities. It represents the liquidity available to a company for day-to-day operations.
2. Step 2: Identify which accounts are classified as Current Assets. Current Assets typically include accounts such as Accounts Receivable, Cash, Inventory, and Prepaid Expenses. Equipment is not a Current Asset; it is classified as a long-term asset.
3. Step 3: Identify which accounts are classified as Current Liabilities. Current Liabilities typically include accounts such as Accounts Payable, Short-term Debt, and Accrued Expenses. Retained Earnings is not a Current Liability; it is part of equity.
4. Step 4: Determine which accounts from the list provided are relevant to the calculation of net working capital. Accounts Receivable is a Current Asset, and Accounts Payable is a Current Liability. These two accounts are included in the calculation of net working capital.
5. Step 5: Exclude accounts that are not relevant to the calculation. Equipment is a long-term asset and Retained Earnings is part of equity, so neither is included in the calculation of net working capital.