Final answer:
Accrued revenue on short-term investments is classified as a current asset on the balance sheet because it represents money earned but not yet received.
Step-by-step explanation:
Accrued revenue on short-term investments is an asset that would be classified under current assets on a company's balance sheet. This classification is because it represents the interest or income that has been earned on those investments but not yet received by the end of the accounting period. In accounting terms, the recognition of accrued revenue aligns with the accrual basis of accounting, which records income when it is earned rather than when the cash is received.
The balance sheet generally includes three categories of items: assets, liabilities, and equity. Assets are further divided into current and non-current assets, with current assets expected to be converted into cash within one year. Since accrued revenue on short-term investments is money that the company expects to receive in the short term, it is a current asset. An example of such a transaction would be interest earned on a six-month treasury bill that has not yet been paid out. Investment income paid on short-term investments will also appear in this section once the payment is actually received, shifting from accrued revenue to cash or cash equivalents.