Which of the following items would most likely appear on Ernst Consulting's balance sheet?

• A. Service Revenue
• B. Accounts Receivable
• C. Consulting Revenue
• D. Rent Expense

Answer: (B)

Verified step by step guidance

1. Understand the purpose of a balance sheet: A balance sheet is a financial statement that reports a company's assets, liabilities, and equity at a specific point in time. It does not include revenue or expense accounts, which are part of the income statement.
2. Identify the nature of each item listed in the problem: Service Revenue and Consulting Revenue are revenue accounts, Rent Expense is an expense account, and Accounts Receivable is an asset account.
3. Recall that assets, liabilities, and equity are the components of a balance sheet. Revenue and expense accounts are not included because they are part of the income statement, which measures performance over a period of time.
4. Determine which item fits the balance sheet criteria: Accounts Receivable represents money owed to the company by clients for services provided, making it an asset. Assets are reported on the balance sheet.
5. Conclude that Accounts Receivable is the correct answer because it is the only item listed that qualifies as an asset and would appear on Ernst Consulting's balance sheet.