For each of the following items, identify the appropriate financial statement element: (a) Accounts Receivable, (b) Service Revenue, (c) Salaries Expense, (d) Retained Earnings. Which of the following correctly matches each item to its financial statement element?

• A. (a) Asset, (b) Revenue, (c) Expense, (d) Equity
• B. (a) Liability, (b) Expense, (c) Revenue, (d) Asset
• C. (a) Expense, (b) Liability, (c) Asset, (d) Revenue
• D. (a) Equity, (b) Asset, (c) Liability, (d) Revenue

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the financial statement elements. The main elements are: Assets (resources owned by the company), Liabilities (obligations owed by the company), Equity (owner's claim on the company's resources), Revenue (income earned from operations), and Expenses (costs incurred to generate revenue).
2. Step 2: Analyze each item in the problem: (a) Accounts Receivable represents money owed to the company by customers, which is a resource owned by the company. Therefore, it is classified as an Asset.
3. Step 3: For (b) Service Revenue, this represents income earned from providing services. Revenue is the financial statement element that captures income generated from operations.
4. Step 4: For (c) Salaries Expense, this represents the cost incurred by the company to pay employees. Expenses are the financial statement element that captures costs incurred to generate revenue.
5. Step 5: For (d) Retained Earnings, this represents the accumulated profits of the company that are reinvested in the business. Equity is the financial statement element that captures the owner's claim on the company's resources.