Business Management Knowledge Quiz On Account Classification

Explanation
Cash at bank is considered an asset because it represents the amount of money that a company has on hand in its bank accounts. It is readily available for use in paying off debts, making purchases, or investing. As an asset, cash at bank holds value and contributes to the overall financial strength of the company.

Explanation
A motor vehicle is considered an asset because it has value and can be owned or controlled by an individual or organization. As an asset, it can be used for various purposes such as transportation, business operations, or personal use. It can also be bought, sold, or leased, making it a valuable and tangible resource.

Explanation
Land is considered an asset because it has economic value and can be owned, bought, and sold. As an asset, land can generate income through various means such as renting or leasing, and it can also appreciate in value over time. Additionally, land can be used as collateral for loans and can contribute to an individual or organization's overall net worth. Therefore, land fits the definition of an asset, which is a resource that has future economic benefit and can be controlled by an entity.

Explanation
Inventories are considered as assets in accounting. They represent goods or products that a company holds for sale or for use in its operations. As assets, inventories have economic value and can generate future economic benefits for the company. They are recorded on the balance sheet under the current assets section and are typically valued at cost or net realizable value, whichever is lower. Therefore, the given answer "asset" is correct as it accurately describes the classification of inventories in accounting.

Explanation
Debtors are individuals or entities who owe money to a company. They are considered as assets because they represent future cash flows to the company. Even though the company has not received the cash yet, it has a legal claim on the debtors to receive the payment in the future. Therefore, debtors are recorded as assets on the company's balance sheet.

Explanation
Owner's equity refers to the residual interest in the assets of a business after deducting liabilities. It represents the owner's investment in the business and includes the initial capital contributed by the owner, as well as any additional investments made over time. Owner's equity is important because it indicates the net worth of the business and represents the amount that would be left for the owner if all assets were sold and liabilities were paid off.

Explanation
A bank overdraft refers to a situation where a customer withdraws more money from their bank account than what is available. This results in a negative balance in the account, and the bank covers this shortfall by providing a temporary loan to the customer. In accounting terms, a bank overdraft is considered a liability because the customer owes the bank the amount of money that has been overdrawn. The customer is required to repay this amount to the bank, making it a liability for them.

Explanation
Accounts receivable is considered an asset because it represents the amount of money that a company is owed by its customers for goods or services that have been provided. It is an asset because it has a monetary value and can be converted into cash in the future. Accounts receivable is recorded on the balance sheet as an asset, and it is an important component of a company's working capital.

Explanation
Rent paid is categorized as an expense because it is a cost incurred by a business in order to operate and generate revenue. Rent is a regular payment made to use a property or space for business purposes, and it is considered an ongoing expense that needs to be budgeted for. It is recorded in the expense category of the financial statements, along with other costs such as salaries, utilities, and supplies. Rent paid does not contribute to the acquisition of assets or investments, which is why it is classified as an expense rather than an investment.