On the balance sheet, which items are considered financing items?

On the balance sheet, which items are considered financing items?

• A. Liabilities and equity
• B. Assets such as cash and inventory
• C. Revenues and expenses
• D. Investments and intangible assets

Answer: (A)

On the balance sheet, financing items are the sources of funds used to finance assets: liabilities and equity. The accounting equation shows assets = liabilities + equity, meaning every asset is funded by borrowing (liabilities) or by the owners (equity). Revenues and expenses belong to the income statement and affect equity indirectly through retained earnings, but they are not financing items themselves. Investments and intangible assets are asset categories, not sources of funds. So the financing items are liabilities and equity.

On the balance sheet, financing items are the sources of funds used to finance assets: liabilities and equity. The accounting equation shows assets = liabilities + equity, meaning every asset is funded by borrowing (liabilities) or by the owners (equity). Revenues and expenses belong to the income statement and affect equity indirectly through retained earnings, but they are not financing items themselves. Investments and intangible assets are asset categories, not sources of funds. So the financing items are liabilities and equity.