Which of the following accounts is correctly matched with its proper balance sheet classification?

• A. Equipment — Current Asset
• B. Prepaid Rent — Current Liability
• C. Unearned Revenue — Stockholders' Equity
• D. Accounts Receivable — Current Asset

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the classifications of balance sheet accounts. The balance sheet is divided into three main sections: Assets, Liabilities, and Stockholders' Equity. Each account is categorized based on its nature and purpose.
2. Step 2: Review the definition of 'Current Asset.' Current assets are resources expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer. Examples include cash, accounts receivable, inventory, and prepaid expenses.
3. Step 3: Analyze the given options: Equipment is classified as a 'Non-Current Asset' because it is a long-term resource used in operations and not expected to be converted into cash within one year. Prepaid Rent is a 'Current Asset' because it represents a payment made in advance for future benefits within the operating cycle. Unearned Revenue is a 'Current Liability' because it represents cash received for services or goods not yet provided.
4. Step 4: Focus on the correct answer: Accounts Receivable is classified as a 'Current Asset' because it represents amounts owed to the company by customers for goods or services provided, and it is expected to be collected within one year.
5. Step 5: Conclude that the correct classification is 'Accounts Receivable — Current Asset,' as it aligns with the definition and purpose of current assets on the balance sheet.