Resources owned and controlled by a business are classified as

Answer Details

The accounting equation, capital plus liabilities equals assets, defines how the resources of a business and the claims on those resources relate to one another.

Assets are the resources that a business owns and controls, and from which it expects to derive future economic benefit, examples include cash, inventory, buildings, and equipment. Capital represents the owner's claim on the business, the amount the owner has invested and is owed by the business. Liabilities represent outside parties' claims, amounts the business owes to lenders, suppliers, or other creditors. Drawings are amounts of cash or goods the owner withdraws from the business for personal use, and are deducted from capital rather than being a resource the business owns.

Because assets are defined precisely as the resources a business owns and controls, this is the correct classification for such resources.

Examination tip: keep the accounting equation in mind, resources the business owns are assets, while capital and liabilities describe who has a claim on those resources.