Which of the following is NOT a component of equity in the balance sheet?

The correct answer is based on understanding the components that make up equity in a balance sheet. Equity represents the owners' claims on the assets of a company after all liabilities have been deducted. Common stock, retained earnings, and additional paid-in capital are all direct components of this equity section.

Common stock represents the value of shares issued to investors, while retained earnings indicate the cumulative profits that have been reinvested in the company rather than distributed as dividends. Additional paid-in capital reflects the amount investors have paid above the par value of the stock when they purchased shares.

In contrast, accounts payable is a liability, not an equity component. It signifies amounts owed to suppliers and creditors for goods and services purchased on credit, representing an obligation the company must settle in the future. Thus, it does not contribute to the owners' equity portion of the balance sheet. Understanding these definitions clarifies why accounts payable is not included in equity.