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To analyze the placement of each account within financial statements, we need to determine whether the accounts are temporary or permanent and identify the specific financial statements on which they appear. Here is a step-by-step solution:
1. Utilities Expense
- Account Type: Temporary
- Financial Statement(s): Income statement
Explanation:
- Utilities Expense is a temporary account as it is used to accumulate expenses for a specific accounting period.
- This account appears on the Income statement because it affects the company's profit or loss for the period.
2. Service Revenue
- Account Type: Temporary
- Financial Statement(s): Income statement, Statement of Owner's Equity, Balance Sheet
Explanation:
- Service Revenue is a temporary account because it represents revenue earned within an accounting period.
- It appears on the Income statement as it affects the company's income.
- After closing entries, the net income will flow into the Statement of Owner's Equity.
- It also impacts the Balance Sheet since the ending balance in the revenue account will ultimately contribute to the equity portion.
3. Accounts Payable
- Account Type: Permanent
- Financial Statement(s): Balance Sheet
Explanation:
- Accounts Payable is a permanent account because it represents the company's obligations that carry over across multiple accounting periods.
- This account appears on the Balance Sheet under liabilities, as it depicts the company's debts to creditors.
4. Prepaid Insurance
- Account Type: Permanent
- Financial Statement(s): Balance Sheet
Explanation:
- Prepaid Insurance is a permanent account because it represents a prepaid expense that benefits future periods.
- This account appears on the Balance Sheet as an asset since it is an advance payment for insurance coverage.
5. Building
- Account Type: Permanent
- Financial Statement(s): Balance Sheet
Explanation:
- The Building account is permanent as it represents a long-term asset.
- It appears on the Balance Sheet under assets because it is a tangible asset used in the company's operations.
Summarized in a table:
[tex]\[ \begin{array}{|c|c|c|c|c|c|} \hline \text{Account} & \text{Account Type} & \multicolumn{3}{c|}{\text{Financial Statement}} \\ \hline & \text{Temporary} & \text{Permanent} & \text{Income statement} & \text{Stmt of owner's equity} & \text{Balance sheet} \\ \hline \text{Utilities Expense} & \checkmark & & \checkmark & & \\ \hline \text{Service Revenue} & \checkmark & & \checkmark & \checkmark & \checkmark \\ \hline \text{Accounts Payable} & & \checkmark & & & \checkmark \\ \hline \text{Prepaid Insurance} & & \checkmark & & & \checkmark \\ \hline \text{Building} & & \checkmark & & & \checkmark \\ \hline \end{array} \][/tex]
This table confirms the classification and financial statement placement for each account based on the analysis provided.
1. Utilities Expense
- Account Type: Temporary
- Financial Statement(s): Income statement
Explanation:
- Utilities Expense is a temporary account as it is used to accumulate expenses for a specific accounting period.
- This account appears on the Income statement because it affects the company's profit or loss for the period.
2. Service Revenue
- Account Type: Temporary
- Financial Statement(s): Income statement, Statement of Owner's Equity, Balance Sheet
Explanation:
- Service Revenue is a temporary account because it represents revenue earned within an accounting period.
- It appears on the Income statement as it affects the company's income.
- After closing entries, the net income will flow into the Statement of Owner's Equity.
- It also impacts the Balance Sheet since the ending balance in the revenue account will ultimately contribute to the equity portion.
3. Accounts Payable
- Account Type: Permanent
- Financial Statement(s): Balance Sheet
Explanation:
- Accounts Payable is a permanent account because it represents the company's obligations that carry over across multiple accounting periods.
- This account appears on the Balance Sheet under liabilities, as it depicts the company's debts to creditors.
4. Prepaid Insurance
- Account Type: Permanent
- Financial Statement(s): Balance Sheet
Explanation:
- Prepaid Insurance is a permanent account because it represents a prepaid expense that benefits future periods.
- This account appears on the Balance Sheet as an asset since it is an advance payment for insurance coverage.
5. Building
- Account Type: Permanent
- Financial Statement(s): Balance Sheet
Explanation:
- The Building account is permanent as it represents a long-term asset.
- It appears on the Balance Sheet under assets because it is a tangible asset used in the company's operations.
Summarized in a table:
[tex]\[ \begin{array}{|c|c|c|c|c|c|} \hline \text{Account} & \text{Account Type} & \multicolumn{3}{c|}{\text{Financial Statement}} \\ \hline & \text{Temporary} & \text{Permanent} & \text{Income statement} & \text{Stmt of owner's equity} & \text{Balance sheet} \\ \hline \text{Utilities Expense} & \checkmark & & \checkmark & & \\ \hline \text{Service Revenue} & \checkmark & & \checkmark & \checkmark & \checkmark \\ \hline \text{Accounts Payable} & & \checkmark & & & \checkmark \\ \hline \text{Prepaid Insurance} & & \checkmark & & & \checkmark \\ \hline \text{Building} & & \checkmark & & & \checkmark \\ \hline \end{array} \][/tex]
This table confirms the classification and financial statement placement for each account based on the analysis provided.
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