BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Failure to make an adjusting entry to recognize accrued salaries payable would cause which of the following?
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An understatement of expenses, liabilities, and stockholders’ equity
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An understatement of expenses and liabilities and an overstatement of stockholders’ equity
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An overstatement of assets and stockholders’ equity
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An overstatement of assets and liabilities
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Explanation:
Detailed explanation-1: -Failure to record the adjusting entry for accrued salaries results in the current year’s profit being overstated. As equipment is depreciated, its book value increases and it accumulated depreciation increases. An adjusting entry includes at least one balance sheet account and at least one income statement account.
Detailed explanation-2: -If the company fails to make an adjusting entry, the interest income will not be recorded; therefore, income will be understated.
Detailed explanation-3: -If a company fails to adjust for accrued revenues: assets will be understated and revenues will be understated.
There is 1 question to complete.