What is considered an asset on the balance sheet?

• A. Deferred revenue
• B. Accounts payable
• C. Short-term debt
• D. Cash reserves

Answer: (D)

Cash reserves are considered an asset on the balance sheet because they represent liquid funds that a company can readily use to meet its short-term obligations and invest in growth opportunities. Assets are resources owned by a company that can provide future economic benefits, and cash is the most liquid asset, enabling companies to maintain operations, pay employees, settle liabilities, and take advantage of investment opportunities.

In contrast, deferred revenue, accounts payable, and short-term debt are classified as liabilities. Deferred revenue represents money received for goods or services that have not yet been delivered, indicating an obligation to fulfill a future service or product delivery. Accounts payable are amounts owed to suppliers for purchases made on credit and reflect the company's short-term obligations. Short-term debt includes borrowings that are due within one year, which represent future payments that the company must make.