Which item are mis-categorized balance sheet? Balance Sheet Liabilities A. Accounts Payable B. Prepaid expenses C. Accounts Receivable D. Accrued expenses E. Unearned revenue F. Long-term debt 1. A 2. B 3. C 4. D 5. E 6. F

The mis-categorized item on the balance sheet under the 'Liabilities' section is B. Prepaid expenses. Prepaid expenses are not liabilities, but rather current assets.

Step-by-step explanation: - A liability is something a company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. - On the balance sheet, liabilities are typically listed based on their due dates. Short-term, or current liabilities, are expected to be settled within a year; long-term liabilities are expected to be settled in more than a year.

Let's evaluate each of the listed items: A. Accounts Payable: This is correctly categorized as a liability. It represents the amount a company owes to its suppliers or vendors for goods or services received. B. Prepaid expenses: This is incorrectly categorized as a liability. It should be an asset, as it represents the service or benefit that the company will receive in the future. C. Accounts Receivable: Although not listed under liabilities, it's worth noting that this is an asset, as it represents money that is owed to the company by its customers. D. Accrued expenses: These are correctly listed as a liability. They represent expenses that have been incurred but not yet paid. E. Unearned revenue: This is correctly listed as a liability. It reflects money received for services or products that have not yet been delivered. F. Long-term debt: This is correctly categorized as a liability; it represents borrowed money that the company must repay over a period longer than one year.

Extra: Understanding the balance sheet is essential for interpreting a company's financial health. The balance sheet is broken into two main categories: assets and liabilities (plus shareholders' equity). Assets include everything the company owns that has value, like cash, inventory, property, and accounts receivable. Liabilities are the company's obligations, such as loans, accounts payable, mortgages, and other debts.

Prepaid expenses are classified as assets because they represent a future economic benefit to the company. For instance, if a company pays in advance for a year's rent, this prepayment is recognized as an asset, because the company has the right to use the property for the year. As the company uses the service or benefit, the prepaid expense will be decreased, and the expense will be recognized on the income statement over time.

Understanding the correct categorization of balance sheet items is fundamental for students, as it can influence the analysis of a company's liquidity, solvency, and overall financial position.