Final answer:
Common stock is the item that belongs in the equity section of the balance sheet. It represents the shareholders' investment in the company. Accounts receivable, accumulated depreciation, and inventory, on the other hand, are considered assets.
Step-by-step explanation:
The item that belongs in the equity section of a balance sheet is 3) Common stock. A balance sheet is an accounting tool that lists assets and liabilities, as well as equity. Equity represents the owners' claims on the assets after all liabilities have been paid off, and it includes items such as common stock, retained earnings, and additional paid-in capital. Common stock is part of the equity section because it reflects the investment of the shareholders into the company. In contrast, the other items listed such as accounts receivable, accumulated depreciation, and inventory are considered assets. Assets are resources that provide future economic benefits to the company, while liabilities represent obligations.
It's important to note that accounts receivable represent money owed to the company by its customers and is an asset. Accumulated depreciation reduces the value of assets and is a contra asset account on the balance sheet, not equity. Inventory consists of products that are to be sold for economic value in the normal course of business, making it another asset.
When discussing a bank's balance sheet, bank capital represents a bank's net worth and is crucial to the bank's ability to operate and withstand financial stress. Assets on a bank balance sheet, such as loans and physical cash, are used to produce profit, but these assets may not always be present in the bank due to the asset-liability time mismatch, where customers can withdraw their funds while the bank's loans are repaid over a longer term.