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.

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Jacqueline Verdugo · Accepted Answer

Final Answer : C, Explanation :  The claims of creditors are reported as liabilities because they are obligations that the company must pay back, while the claims of investors are recorded as stockholders' equity because they represent the ownership interest in the company. This is why the balance sheet equation is Assets = Liabilities + Stockholders' Equity.

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