Q7Q - Intermediate Accounting (Kieso)

Question

Indicate whether each of the following items is a real or nominal account and whether it appears in the balance sheet or the income statement. 

(a) Prepaid Rent. 

(b) Salaries and Wages Payable. 

(c) Inventory. 

(d) Accumulated Depreciation—Equipment. 

(e) Equipment. 

(f) Service Revenue. 

(g) Salaries and Wages Expense. 

(h) Supplies.

Step-by-Step Solution

Answer

The income statement includes income and expenses, whereas the balance sheet includes assets, liabilities, and equities.

Step by Step Solutions Step 1: Meaning of Prepaid Rent

The term prepaid rent defines the amount of money paid by the tenant to the landlord in advance or before the occurrence of the due date. 

Step 2: Identification of the items

Indicating the above items is a real or nominal account, or it appears in the balance sheet or income statement are as described as follows:

	Items	Real or Nominal Account	Balance Sheet or Income Statement
(a)	Prepaid Rent	Real Account	Balance Sheet
(b)	Salaries and wages Payable	Real Account	Balance Sheet
(C)	Inventory	Real Account	Balance Sheet
(d)	Accumulated Depreciation - Equipment	Real Account	Balance Sheet
(e)	Equipment	Real Account	Balance Sheet
(f)	Service Revenue	Nominal Account	Income Statement
(g)	Salaries and wages expenses	Nominal Account	Income Statement
(h)	Supplies	Real Account	Balance Sheet