Question

How are creditor and investor claims reported on a balance sheet?
A) The claims of creditors are liabilities and those of investors are assets.
B) The claims of both creditors and investors are liabilities, but only the claims of investors are considered to be long-term.
C)The claims of creditors are reported as liabilities while the claims of investors are recorded as stockholders' equity.
D)The claims of creditors and investors are considered to be essentially equivalent.

Answer 1

Answer:

C)The claims of creditors are reported as liabilities while the claims of investors are recorded as stockholders' equity.

Explanation:

In a businesses balance sheet, Creditors claims are shown as liabilities. Liabilities show the amount of financing that creditors provided which could be in the form of debts or obligation. Debtors owe creditors an obligation, and this obligation is to pay back. Investors claim are recorded as stockholders equity