Which of the following is classified as an equity account?

• A. Common Stock
• B. Notes Payable
• C. Accounts Receivable
• D. Prepaid Expenses

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of equity accounts. Equity accounts represent the ownership interest of shareholders in a company. Common examples include Common Stock, Retained Earnings, and Additional Paid-In Capital.
2. Step 2: Analyze each option provided in the question. Determine whether each account falls under the category of equity, liability, asset, or expense.
3. Step 3: Evaluate 'Common Stock.' Common Stock is an equity account because it represents ownership shares issued to shareholders.
4. Step 4: Evaluate 'Notes Payable.' Notes Payable is a liability account because it represents amounts owed by the company to creditors.
5. Step 5: Evaluate 'Accounts Receivable' and 'Prepaid Expenses.' Both are asset accounts. Accounts Receivable represents money owed to the company by customers, and Prepaid Expenses represent payments made in advance for future expenses.