How are creditor and investor claims reported on a balance sheet?

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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: C
Explanation: Liabilities and Stockholders' Equity are the sources of financing for the firm's
economic resources. Creditors' claims are reported as liabilities while investors' claims are
reported as stockholders' equity.