Is the showroom an asset or a liability?

• A. A liability
• B. An expense
• C. A fixed asset
• D. None of the above

Answer: (C)

A showroom is a long‑term asset used in daily operations to generate sales, so it is classified as a fixed asset. When a business owns the showroom, its cost is capitalized and then depreciated over its useful life as part of property, plant, and equipment. It’s not a liability—an obligation the company must settle—and not an expense, which would be recognized in the period’s income statement. If the showroom is leased, you’d record a right‑of‑use asset and a lease liability, but the concept remains that the underlying item is an asset, not an expense or a liability.