Which of the following is correct?
A)If a company fails to record depreciation expense,net income and expenses are overstated.
B)If a company fails to record depreciation expense,net income and assets are overstated.
C)If a company overstates depreciation expense,net income is overstated and assets are understated.
D)If a company fails to record depreciation expense,stockholders' equity,net income,and assets are understated.

Question

Quizplus · Accepted Answer

Depreciation expense is an expense that is recorded to reflect the wear and tear of a company's assets over time. If a company fails to record depreciation expense, the assets will be recorded at a higher value than they should be (because they have not been reduced to reflect their decrease in value over time), which in turn will result in an overstatement of net income.

Which of the Following Is Correct