Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: Group of answer choices profit to be understated. an overstatement of assets and an overstatement of liabilities. an understatement of expenses and an understatement of liabilities. an overstatement of expenses and an overstatement of liabilities.
Question
Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: Group of answer choices
profit to be understated.
an overstatement of assets and an overstatement of liabilities.
an understatement of expenses and an understatement of liabilities.
an overstatement of expenses and an overstatement of liabilities.
Solution
Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause:
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Profit to be understated: Accrued expenses represent expenses that have been incurred but not yet recorded. If they are not adjusted for, the expenses will be understated, leading to an overstatement of profit.
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An overstatement of assets and an overstatement of liabilities: Accrued expenses do not affect assets, so they would not cause an overstatement of assets. They do increase liabilities, but if they are not recorded, liabilities will be understated, not overstated.
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An understatement of expenses and an understatement of liabilities: This is correct. If accrued expenses are not recorded, both expenses and liabilities will be understated. Expenses are understated because the expense has been incurred but not recorded. Liabilities are understated because the company has an obligation to pay in the future that has not been recorded.
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An overstatement of expenses and an overstatement of liabilities: This is not correct. If accrued expenses are not recorded, both expenses and liabilities will be understated, not overstated.
Therefore, the correct answer is: Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause an understatement of expenses and an understatement of liabilities.
Similar Questions
Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause: Question 2 Answer a. An understatement of revenues and an understatement of liabilities b. Profit to be overstated c. An understatement of assets and an understatement of revenues d. An understatement of revenues and an overstatement of liabilities
If an entity fails to adjust for accrued revenues: Group of answer choices liabilities will be understated and revenues will be understated. liabilities will be overstated and revenues will be understated. assets will be overstated and revenues will be understated. assets will be understated and revenues will be understated.
If unpaid expenses incurred during the accounting period are not accrued, the income for the period will be understatedGroup of answer choicesTrueFalse
Adjusting entries are required when:Group of answer choicesthe expense will be incurred with the passage of time.the entity’s profits are below its budget.expenses are recorded in the period in which they are incurred.revenues are recorded in the period in which they are earned.
Accrued expenses are:Multiple Choicepaid for in one period but not fully used until a later period.paid for, recorded, and used in one period.used in one period but not paid for until a later period.budgeted but not paid for or used during the period
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