Question

Listed below are three items. Required: Classify each of the items as Revenue, Expense, Other Changes to Stockholders' Equity (other than revenue or expense), or None of These: Revenue Expense Other Changes to Stockholders' Equity None of These Deferred Revenue Supplies Expense Issuance of Stock

Answer 1

Classification of items as Revenue, Expense, Other Changes to Stockholders' Equity (other than revenue or expense), or None of These:

1. Deferred Revenue = Revenue

2. Supplies Expense = Expense

3. Issuance of Stock = Changes to Stockholders' Equity

Step-by-step explanation:

Revenue represents the gross income that an entity receives from the sale of goods and services to customers. Revenue is therefore classified as either Sales Revenue or Service Revenue. It is an important item in the computation of the net income of the entity at the end of a financial period.

Expense represents the gross costs incurred by an entity for the sale of goods and services to its customers. It is usually deducted from the Revenue to obtain the net income.

Changes to Stockholders' Equity occur from revenues and expenses. They also occur from other business transactions like the issuance of stock to stockholders.