Question

Classify each of the following items as assets (A), liabilities (L), or equity (EQ). 1. Land 2. Common stock 3. Equipment 4. Accounts payable 5. Accounts receivable 6. Supplies

Short answer

Answer

Liabilities are amounts of money owed to some of the other parties, and the classification of items into assets, liabilities, or equity is done in ‘Step 2’.

Step-by-step solution

Definition of liabilities

Liabilities are defined as the amount of money owed by a business organization to another party in exchange for acquiring some asset or services.

Classification of items

Items	Assets, liabilities, or Equity
1 Land	Assets
2 Common Stock	Equity
3 Equipment	Assets
4 Accounts Payable	Liabilities
5 Accounts receivables	Assets
6 Supplies	Assets