Flow of Accounts into Financial Statements

Question

The balances for the accounts that follow appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet. Indicate whether each account would flow into the income statement, statement of stockholders' equity, or balance sheet.

Line Item Description Classification
1. Accumulated Depreciation—Building
2. Cash
3. Fees Earned
4. Insurance Expense
5. Prepaid Rent
6. Supplies
7. Dividends
8. Wages Expense

Answer 1

Here's the classification of each line item based on where it flows into the financial statements:

| Line Item Description | Classification | |--------------------------------------------|---------------------------------------| | 1. Accumulated Depreciation—Building | Balance Sheet | | 2. Cash | Balance Sheet | | 3. Fees Earned | Income Statement | | 4. Insurance Expense | Income Statement | | 5. Prepaid Rent | Balance Sheet | | 6. Supplies | Balance Sheet | | 7. Dividends | Statement of Stockholders' Equity | | 8. Wages Expense | Income Statement |

Explanation:

• Accumulated Depreciation—Building: This account represents the total depreciation expense that has been recorded for the building over time and is reported on the balance sheet as a contra asset.
• Cash: This is a current asset and is reported on the balance sheet.
• Fees Earned: This is revenue earned from services, reported on the income statement.
• Insurance Expense: This is an expense incurred during the period, reported on the income statement.
• Prepaid Rent: This is a current asset that represents rent paid in advance, reported on the balance sheet.
• Supplies: This is an asset that represents inventory of supplies on hand, reported on the balance sheet.
• Dividends: This reflects distributions to shareholders and is reported in the statement of stockholders' equity.
• Wages Expense: This is an expense for the period related to employee wages, reported on the income statement.