Which of the following accounts does NOT appear on a classified balance sheet?

• A. Accounts payable
• B. Prepaid insurance
• C. Accounts receivable
• D. Service revenue

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the structure of a classified balance sheet. It organizes assets, liabilities, and equity into specific categories such as current assets, long-term assets, current liabilities, long-term liabilities, and shareholders' equity.
2. Step 2: Identify which accounts are typically listed on a classified balance sheet. For example, 'Accounts payable' is a current liability, 'Prepaid insurance' is a current asset, and 'Accounts receivable' is also a current asset.
3. Step 3: Recognize that revenue accounts, such as 'Service revenue,' do not appear on the balance sheet. Instead, they are reported on the income statement because they represent earnings over a period, not a financial position at a point in time.
4. Step 4: Confirm that the account which does NOT appear on the classified balance sheet is the revenue account, 'Service revenue,' since it is part of the income statement.
5. Step 5: Summarize that all asset and liability accounts appear on the classified balance sheet, but revenue accounts do not, which is why 'Service revenue' is the correct answer.