Fees earned are classified as owner’s equity on the balance sheet. This classification arises from the fact that fees earned represent the income generated by a business for providing services or goods. When a business earns fees, it increases the owner’s equity since it adds to the retained earnings of the business.
To elaborate, when a company performs a service and earns a fee, it records this amount as revenue. Revenue contributes directly to overall profit, and as profit accumulates over time, it enhances the equity stake that the owners or shareholders possess in the business. Hence, fees earned do not appear as assets or liabilities. Assets represent resources owned by the company, while liabilities indicate obligations or debts owed to others. On the other hand, fees earned enhance the value of the company’s net worth, making them a component of owner’s equity.